The following information relates to Babcock Bicyle Company's inventory as of December 31, 20x2: Seats and chains $62,000 40,300 36,300 Selling price Cost Replacement cost Sales commission 15" Frames 17" Frames $164,000 136,000 134,000 10% $170,000 143,000 120,000 10% 21" Frames $101,000 70,700 90,700 10% 10% Calculate the value at which Babcock should report their 15" frame bicycles using the lower of cost or net realizable value rule.

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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.