Testing Your Knowledge Match each term with its definition by writing the approp

Question

Testing Your Knowledge Match each term with its definition by writing the appropriate letier in dhe blank. -1. LIPO liquidation a. The inventory method that utilizes an average- b. Current replacement cost of inventory cost-per-unit figure 2. Merchandise inveneory 3, Specific identification c. The inventory estimation method used when inventory is lost or destroyed d. The inventory method in which the assumed flow of costs matches the actual flow of goods e. The inventory systom that maintains contin- 6. Average-COs uous records 7. Lower of cost or marke 9. Gross profit method 11. Perpetual sysiem r. The rule that governs how inventory should be 8. Retail method valued on the financial statements ost) ending ieventory during periods of rising h. Goods held for sale in the regular course of . The inventory estimation method that uses a J. The inventory method that best follows the 10. Periodic system -12. Market 13. Consignment matching principle k. An arrangement whereby one company sells goods for another company, for a commission L. The inventory system that does not maintain continuous records m. An occurrence that produces unusually high profits under steadily rising prices Short Answer Use the lines provided to answer each item. 1. List the four basic cost-ftow assumptions used 3. List two methods of estimating ending inven- to determine the cost of merchandise inven- tory. 4. Briefly distinguish between the periodic and perpetual inventory systems in terms of record keeping and inventory taking. 2. List the three basic methods of valuing inven- tory at lower of cost or market. Inventories

Explanation / Answer

Match the following answers

1) G

2) H

3) B

4) D

5) J

6) A

7) F

8) I

9) C

10) L

11) E

12) M

13) K

Short answers

1) FIFO COST FLOW, LIFO COST FLOW, SPECIFIC IDENTIFICATION, WEIGHTED AVERAGE COST FLOW

2) HISTORIC COST METHOD , REPLACEMENT COST METHOD, NET REALISABLE VALUE METHOD

3) GROSS PROFIT METHOD, RETAIL INVENTORY METHOD

4)

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