PROBLEM 17: The following information relates to NNN , Inc. which accidentally met a fire on the night of January 19, 2023:  Inventory, July 1, 2022 P 51,600  Purchases, July 1, 2022 to January 19, 2023 368,000  Sales, July 1, 2022 to January 19, 2023 583,000  Purchase returns 11,200  Purchase discounts taken 5,800  Freight in 3,800  Sales returns 8,600 The fire destroyed the entire inventory except for purchases in transit, FOB shipping point of P2,000 and goods having selling price of P4,900 that were salvaged from the fire. The average gross profit rate on net sales is 40%. 22. Compute for the cost of inventory lost in the fire.

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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.