Sam Brown builds houses in various parts of the city. At the end of his fiscal year he has four homes left in his inventory. Sam’s records show the following information on each house:

From past experience Sam knows that he can sell each house for its market list price less 10% for commissions and bargaining.

REQUIRED

Using the valuation alternatives available to him, determine the value of Sam’s closing inventory. Indicate the basis for each valuation and select the one more advantageous to him, assuming he wants to minimize income for tax purposes. (Assume that the method of valuing inventory could change with permission.)

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1. Happy Valley Road 2. Thruway Drive 3. Creekside Place 4. Briar Lane Actual total cost $40,000 25,000 40,000 25,000 Cost to rebuild house $50,000 20,000 45,000 22,000 Market list price $75,000 18,000 42,000 24,000