Chapter 8, Problem 8.26E

Concepts; terminology

• LO8–1 through LO8–5

Listed below are several terms and phrases associated with inventory measurement. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it.

List A	List B
________ 1. Perpetual inventory system	a. Legal title passes when goods are delivered to common carrier.
________ 2. Periodic inventory system	b. Goods are transferred to another company but title remains with transferor.
________ 3. F.o.b. shipping point	c. Purchase discounts not taken are included in inventory cost.
________ 4. Gross method	d. If LIFO is used for taxes, it must be used for financial reporting.
________ 5. Net method	e. Assumes items sold are those acquired first.
________ 6. Cost index	f. Assumes items sold are those acquired last.
________ 7. F.o.b. destination	g. Purchase discounts not taken are considered interest expense.
________ 8. FIFO	h. Used to convert ending inventory at year-end cost to base year cost.
________ 9. LIFO	i. Continuously records changes in inventory.
________ 10. Consignment	j. Assumes items sold come from a mixture of goods acquired during the period.
________ 11. Average cost	k. Legal title passes when goods arrive at location.
________ 12. IRS conformity rule	l. Adjusts inventory at the end of the period.