The Brad's Farm Company uses the retail inventory method to compute ending inventory. Information for last year is as follows:     Cost   Retail Beginning inventory $12,000   $20,000 Net markups     8,000 Purchases 40,000   80,000 Freight-in 7,100     Purchase returns 3,000   6,000 Sales     50,000 Net markdowns     4,000   Required: Determine Brad’s Farm Company's ending inventory based on the retail lower of average cost or market method.

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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.