Ivanhoe's Gift Shop uses a perpetual inventory system and the FIFO cost formula for valuing inventory. The company is now in the process of comparing the cost of its inventory with its net realizable value. The following data are available at Ivanhoe's Gift Shop's year-end, December 31: Units Clothing 96 Jewellery 69 Greeting cards 40 Stuffed toys 58 Unit Cost $9 20 2 13 Net Realizable Value per Unit Lower of cost and net realizable value $7 27 5 40 Determine the lower of cost and net realizable value of the ending inventory assuming Ivanhoe's Gift Shop applies LCNRV on individual items

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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.