Lower of Cost and Net Realizable Value Meredith's Appliance Store has the following data for the items in its inventory at the end of the accounting period: Item Number of Units Historical Cost per Unit Net Realizable Value per Unit Window air conditioner 18   $194   $110   Dishwasher 30   240   380   Refrigerator 27   415   405   Microwave 19   215   180   Washer (clothing) 32   195   248   Dryer (clothing) 21   197   245     Required: 1.  Compute the carrying value of Meredith's ending inventory using the lower of cost and net realizable value (LCNRV) rule applied on an item-by-item basis.  2.  Prepare the journal entry required to value the inventory at LCNRV.

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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.