Lower of Cost or Market Garcia Company's inventory at the end of the year was recorded in its accounting records at $17,800. Due to technological changes in the market, Garcia would be able to replace its inventory for $16,500. Required: 1.  Using the lower of cost or market method, what amount should Garcia report for inventory on its balance sheet at the end of the year?$   Hide     2.  Prepare the journal entry required to value the inventory at the lower of cost or market.             Dec. 31                 (Reduced inventory to market value)

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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.