AIS 301 Ch. 8

Question 1

gross method

Answer 1

A method in which a company reports purchase discounts as a deduction from purchases on the income statement.

Question 2

FOB shipping point

Answer 2

Buyer’s at time of delivery to common carrier

Question 3

consignment goods

Answer 3

Seller’s, not buyer’s

Question 4

Sales with buybacks

Answer 4

Seller’s, not buyer’s

Question 5

Sales with high rates of returns

Answer 5

Buyer’s if you can estimate returns

Question 6

Sales on installments

Answer 6

Buyer’s if you can estimate collectibility

Question 7

Product costs

Answer 7

Costs directly connected with bringing the goods to the buyer’s place of business and converting such goods to a salable condition.

Question 8

Period costs

Answer 8

Generally selling, general, and administrative expenses.

Question 9

LIFO reserve

Answer 9

difference between the inventory method used for internal reporting purposes and LIFO.

Question 10

LIFO liquidation

Answer 10

Older, low cost inventory is sold resulting in a lower cost of goods sold, higher net income, and higher taxes.

Question 11

Dollar-value LIFO

Answer 11

Increases and decreases in a pool are measured in terms of total dollar value, not physical quantity of goods.