Home Furnishings reports inventory using the lower of cost and net realizable value (NRV). Below is information related to its year-end inventory.Inventory            Quantity                Unit Cost             Unit NRV Furniture                 200                       $ 85                          $100 Electronics                50                        400                           300Required: 1. Calculate the total recorded cost of ending inventory before any adjustments. 2. Calculate ending inventory using the lower of cost and net realizable value. 3. Record any necessary adjustment to inventory. 4. Explain the impact of the adjustment in the financial statements.

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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.