As a result of a thorough physical inventory, Railway Company determined that it had inventory worth P180,000 at December 31, 2020. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth P35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is P50,000. Railway purchased P13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. How much is the correct amount of inventory to be reported in Railway Company’s statement of financial position?   a. P215,000 b.P228,000 c. P230,000 d.P193,000

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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.