Saddlery Company sells leather saddles and equipment for horse enthusiasts. Saddlery uses the perpetual inventory system. The following schedule relates to the company's inventory for the month of May: May 1 5 9 13 24 27 30 Beginning inventory Sale Purchase Purchase Sale Sale Purchase 180 units 120 units 60 units 240 units 240 units 60 units 90 units Cost $99,000 $36,300 $158,400 $65,340 Sales $85,800 $184,800 $52,800

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A:

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A: Solution :

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.