Ch 17 - Merchandise Inventory Vocab

Question 1

“average cost method” and “weighted average method”

Answer 1

method of inventory costing using the
average cost of units of an item available for sale
during the period
to arrive at cost of the ending inventory

Question 2

“first in, first out (FIFO) method”

Answer 2

method of inventory costing that assumes the oldest merchandise is sold first

Question 3

“gross profit method”

Answer 3

method of estimating inventory cost
based on the assumption that the
rate of gross profit on sales and the ratio of cost of goods sold to net sales
are relatively constant from period to period

Question 4

“last in, first out (LIFO) method”

Answer 4

method of inventory costing that assumes that the most recently purchased merchandise is sold first

Question 5

“lower of cost or market rule”

Answer 5

the principle by which inventory is reported at either its original cost or its replacement cost, whichever is lower

Question 6

“markdown”

Answer 6

price reduction below the original markon

Question 7

“market price” and “replacement cost”

Answer 7

price the business would pay to buy an item of inventory through usual channels in usual quantities

Question 8

“markon”

Answer 8

difference between the cost and the initial repair price of merchandise

Question 9

“markup”

Answer 9

price increase above the original markon

Question 10

“periodic inventory”

Answer 10

inventory based on a periodic count of goods on hand

Question 11

“perpetual inventory”

Answer 11

inventory based on a running total of number of units

Question 12

“physical inventory”

Answer 12

actual count of the number of units of each type of good on hand

Question 13

“specific identification method”

Answer 13

method of inventory costing based on the actual cost of each item of merchandise