Asked by Giselle Gradilla on May 13, 2024
Verified
If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.
Periodic Inventory System
An inventory system where inventory levels and the cost of goods sold are updated in the accounting records periodically, often at the end of an accounting period.
Gross Profit Method
An accounting technique used to estimate the amount of inventory a company has by using the gross margin percentage.
- Recognize methods for calculating inventory shrinkage or in developing financial reports without conducting a complete physical inventory.
Verified Answer
AA
Amirul AkmalMay 17, 2024
Final Answer :
True
Explanation :
The gross profit method is frequently used for estimating inventory for interim financial statements when a periodic inventory system is used. It provides a quick and easy way to estimate ending inventory without conducting a full physical count.
Learning Objectives
- Recognize methods for calculating inventory shrinkage or in developing financial reports without conducting a complete physical inventory.
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