Chapter 9-10 Vocab

Question 1

Total goods available for sale at cost divided by the total
goods available at retail.

Answer 1

Cost-to-retail ratio

Question 2

A method of estimating the cost of ending inventory by
calculating the dollar increase in retail inventory layers with
price indexes

Answer 2

*Dollar-value LIFO retail method

Question 3

A method for estimating the ending inventory.

Answer 3

Gross profit method

Question 4

A method of estimating the cost of ending inventory which
excludes the beginning inventory in the cost-to-retail ratio

Answer 4

.*LIFO retail method

Question 5

In applying the lower-of-cost-of-market method, the market
cannot be valued less than net realizable value less a
normal profit margin.

Answer 5

Lower (floor) limit

Question 6

A basis whereby inventory is stated at the lower of cost or
market (current replacement cost).

Answer 6

Lower of cost or market (LCM)

Question 7

A decrease below the original retail price.

Answer 7

Markdown

Question 8

An increase in the selling price that follows a markdown. A
markdown cancellation will never increase the selling price above the original retail price

Answer 8

Markdown cancellation

Question 9

An increase above the original retail price.

Answer 9

Markup

Question 10

A decrease in the selling price of an item that had been
previously marked up above the original retail price. A
markup cancellation will never reduce the selling price
below the original retail price.

Answer 10

Markup cancellation

Question 11

The estimated selling price in the ordinary course of
business less reasonably predictable costs of completion,
disposal, and transportation.

Answer 11

Net realizable value

Question 12

The price at which the item was originally marked for sale

Answer 12

Original retail price

Question 13

Agreements to buy inventory weeks, months, years in
advance.

Answer 13

Purchase commitments

Question 14

A method used to estimate the cost of the ending inventory
by applying a cost to retail ratio to the ending inventory at
retail.

Answer 14

Retail inventory method

Question 15

In applying the lower-of-cost-or-market method, the market
cannot be valued more than net realizable value.

Answer 15

Upper (ceiling) limit

Question 16

Expenditures on assets which increase or
extend them.

Answer 16

Additions

Question 17

The amount of interest cost during the period
that theoretically could have been avoided if
expenditures for the asset had not been
made.

Answer 17

Avoidable Interest

Question 18

An expenditure on an asset whereby
(1) the useful life of the asset is increased,
(2) the quantity of units produced from the asset is
increased, or
(3) the quality of the units produced is enhanced.

Answer 18

Capital expenditure

Question 19

The period of time during which interest must
be capitalized. It begins when (1)
expenditures for the asset have been made,
(2) activities that are necessary to get the
asset ready for its intended use are in
progress, and (3) interest cost is being
incurred. The time ends when the asset is
substantially complete and ready for its
intended use.

Answer 19

Capitalization period

Question 20

An exchange where future cash flows change
as a result of the transaction.

Answer 20

Commercial substance

Question 21

The value of an asset measured by the cash
or cash equivalent price of obtaining the
asset and bringing it to the location and
condition necessary for its intended use.

Answer 21

Historical Cost

Question 22

Expenditures that substitute a better asset for
an existing asset.

Answer 22

Improvements (betterments)

Question 23

An asset’s service is terminated through fire,
flood, theft, condemnation or some other
manner not intended by the owner of the
asset.

Answer 23

involuntary conversion

Question 24

The aggregate price at which a group of
assets is acquired.

Answer 24

Lump Sum Price

Question 25

Expenditures made to maintain plant assets whereby the expenditures benefit more than one year or one operating cycle, whichever is longer.

Answer 25

Major Repairs

Question 26

Assets whose price in terms of the monetary unit may change over time, whereas monetary assets—cash and short- or longterm accounts and notes receivable—are fixed in terms of units of currency by contract or otherwise.

Answer 26

Nonmonetary assets

Question 27

Transfers of assets in one direction such as contributions (donations or gifts).

Answer 27

Nonreciprocal transfers

Question 28

Expenditures made to maintain plant assets in operating condition.

Answer 28

Ordinary repairs

Question 29

Assets that (1) are acquired for use in operations and not for resale, (2) are longterm in nature and usually subject to depreciation, and (3) possess physical substance.

Answer 29

Property, Plant and equipment

Question 30

Expenditures intended to benefit future periods that result from rearranging or reinstalling assets.

Answer 30

Rearrangement and reinstallation costs

Question 31

Expenditures that substitute a similar asset for an existing asset.

Answer 31

Replacements

Question 32

An expenditure on an asset whereby (1) the useful life of the asset does not increase, (2) the quantity of units produced from the asset does not increase, and (3) the quality of the units produced is not enhanced.

Answer 32

Revenue (expense) expenditure

Question 33

Assets constructed by a company rather than purchased.

Answer 33

Self-constructed assets

Question 34

The construction expenditures that are weighted by the amount of time that interest cost could be incurred on the expenditure.

Answer 34

Weighted-average accumulated expenditures