CH7 - Inventories

Question 1

Merchandise that is shipped by manufacturers to retailers who act as the manufacturer’s selling agent.

Answer 1

consigned inventory

Question 2

The name for the retailer in a consigned inventory arrangement.

Answer 2

consignee

Question 3

The name for the manufacturer in a consigned inventory arrangement.

Answer 3

consignor

Question 4

The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.

Answer 4

first-in, first-out (FIFO) inventory cost flow method

Question 5

A method of estimating inventory cost that is based on the relationship of gross profit to sales.

Answer 5

gross profit method

Question 6

The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.

Answer 6

inventory turnover

Question 7

A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.

Answer 7

last-in, first-out (LIFO) inventory cost flow method

Question 8

A method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost).

Answer 8

lower-of-cost-or-market (LCM) method

Question 9

The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.

Answer 9

net realizable value

Question 10

The relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold.

Answer 10

number of days’ sales in inventory

Question 11

The purchase order authorizes the purchase of the inventory from an approved vendor.

Answer 11

purchase order

Question 12

The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected.

Answer 12

receiving report

Question 13

A method of estimating inventory cost that is based on the relationship of gross profit to sales.

Answer 13

retail inventory method

Question 14

Inventory method in which the unit sold is identified with a specific purchase.

Answer 14

specific identification inventory cost flow method

Question 15

The subsidiary ledger containing individual accounts for items of inventory.

Answer 15

subsidiary inventory ledger

Question 16

A method of inventory costing in which the cost of the units sold and in ending inventory is a weighted average of the purchase costs.

Answer 16

weighted average inventory cost flow method