The records of Alaska Company provide the following information for the year ended December 31.      At Cost   At Retail Beginning inventory, January 1 $ 469,010   $ 928,950 Cost of goods purchased   3,376,050     6,381,050 Sales         5,595,800 Sales returns         42,800     Required: 1. Use the retail inventory method to estimate the company’s year-end inventory at cost. 2. A year-end physical inventory at retail prices yields a total inventory of $1,686,900. Prepare a calculation showing the company’s loss from shrinkage at cost and at retail.

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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.