ACC 201 CH 6
Card Set Information
ACC 201 CH 6
Inventory Cost Goods Sold
Average days in inventory p. 288
Approximate number of days the average inventory is held. It equals 365 days divided by the inventory turnover ratio.
Cost of goods sold p. 262
Cost of the inventory that was sold during the period.
Finished goods p. 263
Inventory items for which the manufacturing process is complete.
First-in, first-out method (FIFO) p. 266
Inventory costing method that assumes the first units purchased (the first in) are the first ones sold (the first out).
Freight-in p. 278
Cost to transport inventory to the company, which is included as part of inventory cost.
Freight-out p. 278
Cost of freight on shipments to customers, which is included in the income statement either as part of cost of goods sold or as a selling expense.
Gross profit p. 282
The difference between sales revenue and cost of goods sold.
Gross profit ratio p. 289
Measure of the amount by which the sale price of inventory exceeds its cost per dollar of sales. It equals gross profit divided by net sales.
Income before income taxes p. 283
Operating income plus nonoperating revenues less nonoperating expenses.
Inventory p. 262
Items a company intends for sale to customers.
Inventory turnover ratio p. 287
The number of times a firm sells its average inventory balance during a reporting period. It equals cost of goods sold divided by average inventory.
Last-in, first-out method (LIFO) p. 267
Inventory costing method that assumes the last units purchased (the last in) are the first ones sold (the first out).
LIFO adjustment p. 277
An adjustment used to convert a company's own inventory records maintained on a FIFO basis to LIFO basis for preparing financial statements.
LIFO conformity rule p. 272
IRS rule requiring a company that uses LIFO for tax reporting to also use LIFO for financial reporting.
Lower-of-cost-or-market (LCM) method p. 284
Method where companies report inventory in the balance sheet at the lower of cost or market value, where market value equals replacement cost.
Multiple-step income statement p. 282
An income statement that reports multiple levels of income (or profitability).
Net income p. 283
Difference between all revenues and all expenses for the period.
Operating income p. 283
Profitability from normal operations that equals gross profit less operating expenses.
Periodic inventory system p. 274
Inventory system that periodically adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand.
Perpetual inventory system p. 274
Inventory system that maintains a continual record of inventory purchased and sold.
Raw materials p. 263
Components that will become part of the finished product but have not yet been used in production.
Replacement cost . p. 284
The cost to replace an inventory item in its identical form
Specific identification method p. 266
Inventory costing method that matches or identifies each unit of inventory with its actual cost.
Weighted-average cost method p. 268
Inventory costing method that assumes both cost of goods sold and ending inventory consist of a random mixture of all the goods available for sale.
Work-in-process p. 263
Products that have started the production process but are not yet complete at the end of the period.