ACC 300 Chapter 9

Question 1

Net realiizable value

Answer 1

Sales price-cost to sell

Question 2

Lower of cost and net realizable value

Answer 2

Compare cost in the books to market price

Question 3

Cost of goods sold method

Answer 3

Report the inventory at net realizable value in both the balance sheet and the cogs section of the income statement

Question 4

Loss method

Answer 4

Report the inventory decline with a debit to a loss accoint and credit an allowance account

Question 5

Ceiling for LCM

Answer 5

NRV

Question 6

Floor for LCM

Answer 6

Nrv-NPM

Question 7

NRV prevents

Answer 7

Overstatment of inventory and understatement of current period loss

Question 8

NRV-NPM

Answer 8

Prevents understatement of inventory and overstatement of current period loss

Question 9

Lower of cost or market

Answer 9

Used for lifo or retail inventory methods of costing inventory. Write inventory down when a devaluation occurs

Question 10

Gross profit method

Answer 10

Used when an estimate of a firms inventory is required

Question 11

Four items of info sufficient to estimate the cost of ending inventory

Answer 11

Cost of BI, cost of purchases, sales during period, markup

Question 12

Markup on cost to markup on retail

Answer 12

Markup on cost/(1+markup on cost)

Question 13

Markup on retail to markup on cost

Answer 13

Markup on retail/(1-markup on retail)

Question 14

Markup as a percentage of retail

Answer 14

Markup/selling price

Question 15

Markup as a percentage of cost

Answer 15

Markup/cost