The Home Depot uses the specific identification method for inventory valuation. The following information is available for the year ending December 31, 2023:

• Beginning inventory: 150 units @ $40 each
• Purchases:
  • 300 units @ $42 each
  • 200 units @ $45 each

• Sales: 500 units @ $70 each (150 units from beginning inventory, 300 units from first purchase, 50 units from second purchase)

Required:

1. Calculate the cost of goods sold (COGS).
2. Determine the ending inventory value.
3. Prepare the journal entries for inventory purchases and sales.
4. Discuss the impact of the specific identification method on financial statements.