Chapter 9

Question 1

Lower of Cost or Net Realizable Value

Answer 1

Subsequent measurement of inventory applied by companies that use FIFO, average cost, or any other method besides LIFO or the retail inventory method. This approach requires companies to report ending inventory at the lower of cost or net realizable value.

Question 2

Net Realizable Value (NRV)

Answer 2

estimated selling prices of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation

Question 3

Lower of Cost or Market (LCM)

Answer 3

subsequent measurement of inventory applied by companies that use LIFO or the retail inventory method. This approach requires companies to report ending inventory at the lower of cost or market

Question 4

Market

Answer 4

Current replacement cost of inventory, not to exceed net realizable value (NRV) or to be lower than NRV minus a normal profit margin

Question 5

Gross Profit Method

Answer 5

estimates cost of goods sold, which is then subtracted from cost of goods available for sale to estimate ending inventory

Question 6

Gross Margin Method

Answer 6

estimates cost of goods sold, which is then subtracted from cost of goods available for sale to estimate ending inventory

Question 7

Cost-to-Retail Percentage

Answer 7

ratio found by dividing goods available for sale at cost by goods available for sale at retail

Question 8

Net Markdown

Answer 8

net effect of the change in selling price (increase, decrease, increase)