Defining Chapter Terms Terms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o. Key Inventory Terms and Phrases Key Inventory Terms and Phrases Description of Terms and Phrases Answerabcdefghijklmno 1. Net realizable value a. Requires retroactive restatement of financial statements Answerabcdefghijklmno 2. Lower-of-cost-or-market b. Method for valuing inventory applying to LIFO and retail methods Answerabcdefghijklmno 3. Allowance to reduce inventory to net realizable value c. Cancellation of additional markup Answerabcdefghijklmno 4. Gross profit method d. Inventory estimation that is not acceptable under GAAP Answerabcdefghijklmno 5. Estimated loss on purchase commitment e. Method that approximates lower-of-cost-or-market Answerabcdefghijklmno 6. Change in inventory method from average to FIFO f. Not usually practical to retroactively restate or adjust financial statements Answerabcdefghijklmno 7. Change from FIFO to LIFO g. Reduction in original sales price Answerabcdefghijklmno 8. Markdown h. Selling price net of completion and disposal costs Answerabcdefghijklmno 9. Additional markup cancellation i. Theft of inventory that exceeds expectations Answerabcdefghijklmno 10. Retail inventory method—Conventional Method j. Dollar amount required to purchase an inventory item Answerabcdefghijklmno 11. Abnormal casualty loss k. Recorded when contract price is greater than market price Answerabcdefghijklmno 12. Replacement cost l. Requires net markups and markdowns in cost-to-retail percentage Answerabcdefghijklmno 13. Retail inventory method—Average Method m. Adjusted in accounting records in the period discovered Answerabcdefghijklmno 14. Material error n. Allows for estimation of inventory values when multiple items are purchased at one price Answerabcdefghijklmno 15. Relative sales value method o. Contra inventory account

Defining Chapter Terms Terms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o. Key Inventory Terms and Phrases Key Inventory Terms and Phrases Description of Terms and Phrases Answerabcdefghijklmno 1. Net realizable value a. Requires retroactive restatement of financial statements Answerabcdefghijklmno 2. Lower-of-cost-or-market b. Method for valuing inventory applying to LIFO and retail methods Answerabcdefghijklmno 3. Allowance to reduce inventory to net realizable value c. Cancellation of additional markup Answerabcdefghijklmno 4. Gross profit method d. Inventory estimation that is not acceptable under GAAP Answerabcdefghijklmno 5. Estimated loss on purchase commitment e. Method that approximates lower-of-cost-or-market Answerabcdefghijklmno 6. Change in inventory method from average to FIFO f. Not usually practical to retroactively restate or adjust financial statements Answerabcdefghijklmno 7. Change from FIFO to LIFO g. Reduction in original sales price Answerabcdefghijklmno 8. Markdown h. Selling price net of completion and disposal costs Answerabcdefghijklmno 9. Additional markup cancellation i. Theft of inventory that exceeds expectations Answerabcdefghijklmno 10. Retail inventory method—Conventional Method j. Dollar amount required to purchase an inventory item Answerabcdefghijklmno 11. Abnormal casualty loss k. Recorded when contract price is greater than market price Answerabcdefghijklmno 12. Replacement cost l. Requires net markups and markdowns in cost-to-retail percentage Answerabcdefghijklmno 13. Retail inventory method—Average Method m. Adjusted in accounting records in the period discovered Answerabcdefghijklmno 14. Material error n. Allows for estimation of inventory values when multiple items are purchased at one price Answerabcdefghijklmno 15. Relative sales value method o. Contra inventory account

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 3RQSC

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Defining Chapter Terms

Terms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o.

Key Inventory Terms and Phrases

	Key Inventory Terms and Phrases	Description of Terms and Phrases
Answerabcdefghijklmno	1. Net realizable value	a. Requires retroactive restatement of financial statements
Answerabcdefghijklmno	2. Lower-of-cost-or-market	b. Method for valuing inventory applying to LIFO and retail methods
Answerabcdefghijklmno	3. Allowance to reduce inventory to net realizable value	c. Cancellation of additional markup
Answerabcdefghijklmno	4. Gross profit method	d. Inventory estimation that is not acceptable under GAAP
Answerabcdefghijklmno	5. Estimated loss on purchase commitment	e. Method that approximates lower-of-cost-or-market
Answerabcdefghijklmno	6. Change in inventory method from average to FIFO	f. Not usually practical to retroactively restate or adjust financial statements
Answerabcdefghijklmno	7. Change from FIFO to LIFO	g. Reduction in original sales price
Answerabcdefghijklmno	8. Markdown	h. Selling price net of completion and disposal costs
Answerabcdefghijklmno	9. Additional markup cancellation	i. Theft of inventory that exceeds expectations
Answerabcdefghijklmno	10. Retail inventory method—Conventional Method	j. Dollar amount required to purchase an inventory item
Answerabcdefghijklmno	11. Abnormal casualty loss	k. Recorded when contract price is greater than market price
Answerabcdefghijklmno	12. Replacement cost	l. Requires net markups and markdowns in cost-to-retail percentage
Answerabcdefghijklmno	13. Retail inventory method—Average Method	m. Adjusted in accounting records in the period discovered
Answerabcdefghijklmno	14. Material error	n. Allows for estimation of inventory values when multiple items are purchased at one price
Answerabcdefghijklmno	15. Relative sales value method	o. Contra inventory account

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