3. Duncan Company sells lumber. Inventory cost data per 1,000 böard are as follows: Item Quantity on hand Original cost Net realized value Plywood 21 $ 450 350 Maple 23 $1,000 1,850 Pine 38 $ 700 650 Redwood 16 $1,600 1,700 (1) By what amount, if any, should each item (considered separately) be written down? (2) Make the appropriate journal entry (or entries): a. Assuming that each inventory item is considered separately. b. Assuming that lower-of-cost-or-net-realizable-value method is applied to total inventory.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.