Chapter 5, Problem 5.2KTQ

Inventory Valuation

Specific identification method

Weighted average cost method

FIFO method

LIFO method

LIFO liquidation

LIFO conformity rule

LIFO reserve

Replacement cost

Inventory profit

Lower-of-cost-or-market (LCM) rule

Inventory turnover ratio

Number of days’ sales in inventory

Moving average (Appendix)

1. The name given to an average cost method when a weighted average cost assumption is used with a perpetual inventory system.
2. An inventory costing method that assigns the same unit cost to all units available for sale during the period.
3. A conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale.
4. An inventory costing method that assigns the most recent costs to ending inventory.
5. The current cost of a unit of inventory.
6. An inventory costing method that assigns the most recent costs to cost of goods sold.
7. A measure of how long it takes to sell inventory.
8. The IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders.
9. An inventory costing method that relies on matching unit costs with the actual units sold.
10. The portion of the gross profit that results from holding inventory during a period of rising prices.
11. The result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO.
12. The excess of the value of a company’s inventory stated at FIFO over the value stated at LIFO.
13. A measure of the number of times inventory is sold during the period.