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Match Each of the Following Terms with the Appropriate Definition

Question 204

Matching

Match each of the following terms with the appropriate definition.

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Responses:

Inventory turnover

An inventory valuation method that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold

Days' sales in inventory

Financial statements prepared for periods of less than one year

Interim statements

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

Conservatism principle

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

Net realizable value

An inventory pricing method that assumes the unit prices of the beginning inventory and of each purchase are weighted by the number of units of each in inventory; the calculation occurs at the time of each sale

Retail inventory method

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

FIFO method

The expected sales price of an item minus the cost of making the sale

Weighted average inventory method

An inventory valuation method where the purchase cost of each item in ending inventory is identified and used to determine the cost assigned to inventory

LIFO method

An inventory valuation method that assumes that inventory items are sold in the order acquired

Specific identification method

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