Valuing Inventory and Recording Entries Using Relative Sales Value Method AVC inc purchased 1,680 bags of pecans that cost $5.880 The company also incurred $420 for transportation and grading. The relative sales value method is used to allocate the lump sum cost. The pecans graded out as follows Grade Quantity (hags) Current Market Price per Bag 16.75 4.00 A . C Required a Prepare the purchase entry assuming a perpetual inventory system b. Determine the value of ending inventory assuming the following quantities are in inventory at year-end grade A, 140 bags: grade 112 bags and grade C 56 bags Prepare the entry for sale of 28 bags of grade A pecans at a market price of $5.75 cash per bag Note: Carry all decimals in calculations round the final answer to the nearest dolar

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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.