Asked by Kelvin Gramajo on May 09, 2024
Verified
To avoid the time-consuming process of taking an inventory each year,most companies use the gross profit method to estimate ending inventory.
Gross Profit Method
An inventory estimation method used to calculate the cost of goods sold and ending inventory, based on gross profit margins.
- Examine the dependability of methods used to estimate inventory and their importance in accounting and reporting contexts.
Verified Answer
SA
shaharial adittoMay 13, 2024
Final Answer :
False
Explanation :
Most companies use the gross profit method for estimating inventory primarily for interim financial reports or when an inventory loss occurs due to events like theft or natural disasters, not as a substitute for annual physical inventory counts.
Learning Objectives
- Examine the dependability of methods used to estimate inventory and their importance in accounting and reporting contexts.
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