Term
| How is the cost-to-retail percentage calculated using the aveage cost method? |
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Definition
| Dividing the total cost of goods available for sale by total goods available for sale at retail. |
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Term
| What are two popular methods of inventory estimation techniques? |
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Definition
| Gross Profit Method and Retail Inventory Method. |
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Term
| A disclosure note for a change in the LIFO method is needed to explain... |
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Definition
| (a) the nature of the change; (b) the effect of the change on current year's income and earnings per share, and (c) why retrospective application was impracticable. |
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Term
| What are purchase commitments? |
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Definition
| Contracts that obligate a company to purchase a specified amount of merchandise or raw materials at specified prices on or before specified dates. |
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Term
| The gross profit method is useful in situations where estimates of inventory are desirable: |
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Definition
In determining the cost of inventory that has been lost, stolen, or destroyed.
In estimating inventory and cost of goods sold for interim periods.
In auditors' testing of the overall reasonableness of inventory amounts reported by clients.
In budgeting and forecasting. |
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Term
| If an inventory error is discovered in the same accounting period it occurred, the original erroneous entry should simply be... |
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Definition
| Reversed and the appropriate entry recorded. |
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