Professor Guerrero's Blog: Ch6 Inventories

What is Average Cost Method?
The average cost method is the method of inventory valuation in which a weighted average unit cost is computed and used to arrive at the cost of the ending inventory.

What is First-in, First-out (FIFO) Method?
The FIFO method is the method of inventory costing based on the assumption that the Beginning inventory units and then the early purchases are sold first, leaving the later purchases in the ending inventory.

What is Last-in, First-out (LIFO) Method?
The LIFO method is a method of inventory costing based on the assumption that the last purchases are sold first, leaving the Beginning inventory units and the early purchases in the ending inventory.

What is Gross Profit Method?
The gross profit method is a method of estimating inventory cost that is based on the relationship of gross profit to sales.

What is Inventory Turnover?
The inventory turnover is the relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory. Low turonver is a sign of inefficiency or low sales.

What is Lower-of-cost-or-market (LCM) Method?
The LCM method is a method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost).

What is Net Realizable Value?
The net realizable value is the estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.

What is Number of Days’ Sales in Inventory?
The number of days’ sales in inventory is the relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold.

What is Physical Inventory?
The physical inventory is a detailed listing of merchandise on hand.

What is Retail Inventory Method?
The retail inventory method is a method of estimating inventory cost that is based on the relationship of gross profit to sales.
Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll