Fred sells hats in his shop and at the end of the financial year he is is required to do a stocktake.

He has 200 hats in the shop available to show and sell to customers. They cost $20 each. He sells them for $50 each. Due to Covid, there has been a price rise from his supplier, so in future he can only replace them for $30.

Required:

What are his options in valuing the stock? Explain to him what is the best option so as to legally reduce his income tax.