The following data are available for Vortex Manufacturing Pty Ltd at 30 June 2020: Inventory type Cost Net realisable value Raw materials $199,200 $212,420 Work in progress 171,900 162,950 Finished goods 290,400 263,880 Inventories are valued at the lower of cost and net realisable value. The value of inventory is derived by the method most appropriate to each particular class of inventory and the first-in-first-out basis is applied. Required: Explain the lower of cost and net realisable value basis of accounting for inventories.               Calculate the lower of cost and net realisable value for inventory.  Prepare the adjusting entry at 30 June 2020 to record any adjustments for the valuation of inventory.  Prepare an extract of the inventory note section for

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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.