Allen’s convenience store uses the periodic system to account for inventory and prepares financial statements monthly. on October 31st, as part of the adjusting entries, Allen calculates the inventory sold in the month of October. A physical count reveals that the company has inventory on hand that is worth $50,000. The ending inventory of September is $40,000. And during October, the company made one inventory purchase of $40,000. Required: What is the cost of goods sold and ending inventory balance reported in the monthly financial statements prepared as of OCtober 31st?

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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.