Lower of Cost or Net Realizable Value The accountant for Davidson, Inc. prepared the following analysis of its inventory at year end: Item Units Cost per Unit RSK-89013 510 $38 LKW-91247 329 49 QEC-57429 Required: 462 25 Net Realizable Value $44 45 33 1. Compute the carrying value of the ending inventory using the lower of cost or net realizable value rule applied on an item-by-item basis. 45,735 v Feedback Check My Work 1. Compare actual cost of inventory to its market value. The lower amount is the value of inventory. If market value is lower, the inventory account is adjusted 2. Prepare the journal entry required to value the inventory at lower of cost or net realizable value. If an amount box does not require an entry, leave it blank. Cost of Goods Sold Inventory 45,735 X 45,735 X Feedback Check My Work 2. Compare actual cost of inventory to its market value. The lower amount is the value of inventory. If market value is lower, the inventory account is adjusted.