AP$13\mathrm{.}7($LO $2)$ Inventory valuation The following is a copy of the auditor$$s working paper for auditing inventory balances for the client Zack$$s Electrical Supply. It shows the details of the net realizable value $($NRV$)$ tests.

Based on the tests of beginning inventory, production costs, and ending inventory, determine the appropriateness of cost of sales.

Evaluate the net realizable value of inventory:

Examine sales invoices after year$-$end and perform lower$-$of$-$cost$-$or$-$NRV test.

Compare inventories with client$$s current sales catalog and sales reports.

Inquire about slow$-$moving, excess, or obsolete inventories and determine need for write$-$down.

Evaluate management$$s process for estimating the net realizable value of inventory using hindsight.

Evaluate the net realizable value of inventory given information about:

Industry trends.

Inventory turnover trends.

Specific slow$-$moving inventory.