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Match Each of the Following Terms with the Appropriate Definition

Question 112

Matching

Match each of the following terms with the appropriate definition.

Premises:

Responses:

Inventory turnover

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

Retail inventory method

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

Conservatism constraint

Financial statements prepared for periods of less than one year.

Net realizable value

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

Weighted average inventory method

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

Days' sales in inventory

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.

Interim statements

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

FIFO 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 costs for the most recent items purchased are sold first and charged to cost of goods sold.

Specific identification method

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.