Practice Exercise #5-1

FOB Destination

The terms under which involve the title to merchandise being transferred to the purchaser when the goods are received.

Net method

It is a method of inventory valuation that reports inventory after consideration of any purchase discounts.

Trade discount

It is a discount that converts a list price to the price a purchaser is actually charged

FIFO Method

It is a cost flow assumption that normally approximates the actual physical flow of the merchandise.

Gross method

It is a valuation method that reports the inventory cost before the consideration of purchase discounts

Perpetual inventory system

It refers to records that provide a continuous summary of inventory activity

Period costs

It refers to costs that are recognized as expenses during the period in which they are incurred

Specific identification

It is the cost flow assumption in which specific costs are attributed to identify items of inventory.

Consigned goods

It refers to inventory that is physically located at a dealer, but the title is retained by the shipper until the merchandise is sold

Product costs

These are inventoriable costs.