Chapter 5 Terminology

Question 1

Goods on consignment are goods sent by the owner, called the ______, to another party, the ______.

Answer 1

Consignor; consignee.

Question 2

Damaged, obsolete (out-of-date), and deteriorated goods are not reported in inventory if they cannot be sold.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 ______________.

Answer 2

Net realizable value

Question 3

When each item in inventory can be matched with a specific purchase and invoice, we can use _________ or __ to assign costs.

Answer 3

Specific identification or SI

Question 4

Last-in, first-out (LIFO)

Answer 4

Assumes that the most recent purchases are sold first.

Question 5

First-in, first-out (FIFO)

Answer 5

Assumes that inventory items are sold in the order acquired.

Question 6

Weighted average or WA (also called average cost)

Answer 6

Requires that we use the weighted average cost per unit of inventory at the time of each sale.

Question 7

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 ________________.

Answer 7

lower of cost or market (LCM).

Question 8

To use the weighted average method:

Answer 8

Divide the cost of the goods that are available for sale by the number of those units still on the shelf.