Chapter 5 Terminology Flashcards
Goods on consignment are goods sent by the owner, called the ______, to another party, the ______.
Consignor; consignee.
Damaged, obsolete (out-of-date), and deteriorated goods are not reported in inventory if they cannot be sold. If these can be sold at a lower price, they are included in inventory as ______________.
Net realizable value
When each item in inventory can be matched with a specific purchase and invoice, we can use _________ or __ to assign costs.
Specific identification or SI
Last-in, first-out (LIFO)
Assumes that the most recent purchases are sold first.
First-in, first-out (FIFO)
Assumes that inventory items are sold in the order acquired.
Weighted average or WA (also called average cost)
Requires that we use the weighted average cost per unit of inventory at the time of each sale.
After companies apply one of four costing methods (FIFO, LIFO, weighted average, or specific identification), inventory is reviewed to ensure it is reported at the ________________.
lower of cost or market (LCM).
To use the weighted average method:
Divide the cost of the goods that are available for sale by the number of those units still on the shelf.