7.07- Inventory Estimation Methods

Question 1

How do you calculate net mark-ups?

Answer 1

mark-ups - mark-up cancellations

Question 2

How do you calculate net mark-downs?

Answer 2

mark-downs - mark-down cancellations

Question 3

What is the LIFO retail inventory method?

Answer 3

It approximates the original cost

Question 4

What are the two differences between LIFO retail inventory method and LCM?

Answer 4

• net mark-ups and net mark-downs are both included in the cost to retail percentage calculation
• beginning inventory is NOT included in the cost to retail percentage calculation

Question 5

What is a firm purchase commitment?

Answer 5

a non-cancelable agreement

Question 6

What does the JE look like for a loss in a firm purchase commitment?

Answer 6

Debit- Estimated Loss (I/S)

Credit- Estimated Liability