On January 1, 2024, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2024 and 2025 are as follows: Beginning inventory Purchases Purchase returns Freight-in Net markups Net markdowns 2024 Cost $ 159,250 450,000 4,500 7,200 Retail $ 245,000 631,000 3,550 5,900 4,600 Cost $ 685,000 4,100 7,000 2025 Retail $ 918,000 4,500 11,600 7,900

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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.