Chapter 9, Problem 9.29E

Concepts; terminology

• LO9–1 through LO9–7

Listed below are several terms and phrases associated with inventory measurement. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it.

List A	List B
__________ 1. Gross profit ratio	a. Reduction in selling price below the original selling price
__________ 2. Cost-to-retail percentage	b. Beginning inventory is not included in the calculation of the cost-to-retail percentage
__________ 3. Additional markup	c. Deducted in the retail column after the calculation of the cost-to-retail percentage
__________ 4. Markdown	d. Requires base year retail to be converted to layer year retail and then to cost
__________ 5. Net markup	e. Gross profit divided by net sales
__________ 6. Retail method, FIFO and LIFO	f. Material inventory error discovered in a subsequent year
__________ 7. Conventional retail method	g. Must be added to sales if sales are recorded net of discounts
__________ 8. Change from LIFO	h. Deducted in the retail column to arrive at goods available for sale at retail
__________ 9. Dollar-value LIFO retail	i. Divide cost of goods available for sale by goods available at retail
__________ 10. Normal spoilage	j. Average cost, lower of cost or market
__________ 11. Requires retrospective restatement	k. Added to the retail column to arrive at goods available for sale
__________ 12. Employee discounts	l. Increase in selling price subsequent to initial markup
__________ 13. Net markdowns	m. Selling price less estimated selling costs
__________ 14. Net realizable value	n. Accounting change requiring retrospective treatment