Section 7-INVENTORY COSTING USING THE LOWER OF COST OR MARKET RULE 1. Use the following information to calculate inventory applying LCM by item: Normal Recorded cost Replacement cont Expected sales price Disposal profit costs margin Item A $12 $13 $16 $2 Item B $22 $20 $24 $6 Item C $17 $16 $19 $2 Item D $42 $38 $60 56 Item E $32 $30 $40 $6 28334 $3 $2 $2 $8 $3 Item F $18 $20 $24 $7 $2 2. At year end 20X8, Ancho Canned Chile has 8,000 units on hand at a weighted- average cost of $13 per item. At year end, Ancho learns that the purchase price has fallen to $11. Sales for the year were at $16 per item. Resellers cost Ancho an average $4 per unit. Ancho's normal profit margin is $3 per unit. a. What is Ancho's ending inventory applying LCM by item? b. If the loss is not significant enough to warrant disclosure on the income statement, what year end journal entry does Ancho record? c. If the market value of the inventory increases in the following year, can Ancho recognize the recovery?