The following information pertains merchandise inventory of Bloom Company at the end of year.  Apply Lower of Cost or Market rule and provide the necessary adjusting entry for adjustment of inventory account balance in the space provided on the Answer Sheets.   Item Quantity on hand Unit Cost Selling Price Replacement Cost Net Realizable Value (Ceiling Price) Net Realizable Value Less Normal Profit (Floor Price) LCM Zoom 300 $90 $120 $105 $100 $75   Zap 600 $60 $65 $45 $60 $55       Debit Credit

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A: The cost of goods sold is the cost which was incurred on the units that were sold during period.

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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.