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Match the Following Terms with the Appropriate Definition

Question 203

Matching

Match the following terms with the appropriate definition.

Premises:

Responses:

Lower of cost or market

The number of times a company's average inventory is sold during an accounting period

Consignor

The method of assigning costs to inventory where the purchase cost of each item in inventory is identified and used to determine the cost of inventory

Conservatism principle

One who receives and holds goods owned by another for purposes of selling the goods for the owner

Days' sales in inventory

An owner of goods who ships them to another party who will then sell the goods for the owner

Consistency principle

A method for estimating inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail prices

Retail inventory method

A procedure for estimating inventory where the past gross profit rate is used to estimate the cost of goods sold, which is then subtracted from the cost of goods available for sale to determine the estimated ending inventory

Specific identification method

The principle that aims to select the less optimistic estimate when two or more estimates are about equally likely

Consignee

The accounting principle that says a company uses the same accounting methods period after period so that the financial statements of succeeding periods will be comparable

Gross profit method

An estimate of days needed to convert the inventory available at the end of the period into receivables or cash

Inventory turnover

The required method of reporting inventory at market when market is lower than cost