The DJ company uses a periodic inventory system. The beginning balance of inventory and purchases made by the company during December 2020 are given below.  December 01: Beginning inventory, 50 units @ Rs40 per unit. December 18: Inventory purchased, 60 units @ Rs48 per unit. December 20: Inventory purchased, 20 units @ Rs 52 per unit. December 25: Inventory purchased, 70 units @ Rs56 per unit. The DJ company sold 160 units during December 2020. Required: Compute inventory on December 31, 2020, and cost of goods sold for December using the following inventory costing method: Last in, first-out (LIFO) method. Average cost method.

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A: Solution: Cost of merchandise purchased is the cost of purchases which is computed as purchase cost…

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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.