J. Hartney, controller of Babbit Plumbing, has compiled the following information to aid him in applying the lower-of-cost-or-market rule to the company’s inventory. Replacement Cost Net Realizable Value Net Realizable Value Less a Normal Profit Historical Cost Item A $52 $55 $ 7 $60 Item B 61 57 10 55 Item C 72 75 3 77 Item D 45 50 5 44 Item E 40 47 9 50 Item F 39 40 1 40 Item G 12 17 5 8 Item H 10 8 1 5 REQUIRED:

a. Compute the amount that Babbit Plumbing should report in the account “Inventory” under the lower-of-cost-or-market rule assuming that the company applies this rule to each item individually.

b. Prepare any journal entries nechssary to adjust inventory to the lower of cost or market.