Lychee Company uses the retail method of inventory valuation. The following information is available: Beginning inventory: P186,196 at cost; P302,250 at retail Purchases: P703,740 at cost; P1,120,000 at retail Freight in: P12,400 Purchase discounts: P14,400 Purchase returns: P25,050 at cost; P48,300 at retail Net additional markups – P100,000 Net markdowns – P205,000 Sales revenue – P900,000 What is the estimated cost of the ending inventory using the average 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.