Discuss and explain the major uses of the gross profit method of inventory estimation.

Q: What are the different methods to estimate inventory?

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Q: Valuing Inventory and Recording Entries Using Relative Sales Value Method

A: Inventory valuation is very important and is generally done at the end of the accounting year. The…

Q: Estimate ending inventory and cost of goods sold using the retail inventory method, applying the…

A: The retail inventory method is an accounting method used to estimate the value of a store's…

Q: What is the amount of Inventory to be presented at the Balance Sheet date using the LCNRV Individual…

A: Solution Concept FIFO method :  Under this method the goods in opening inventory is sold first LCNRV…

Q: Describe the alternative approaches for recording inventory write-downs.

A: Inventory write-down: As per GAAP (Generally Accepted Accounting Principles), the companies are…

Q: Describe diff erent inventory valuation methods (cost formulas).

A: The manner in which an organization calculates the product costs (inventory value assessment)…

Q: How to determine the inventory cost using the fifo and lifo

A: Inventory cost is the cost to incur handling charges,maintaining cost and storage cost with…

Q: Explain how the inventory cost flow assumption that was utilized might have an impact on liquidity…

A: Inventory Cost Flow Assumptions refer to the many ways for determining the cost of inventory sold…

Q: Explain which physical units of goods should be included in inventory.

A: Inventory:   It refers to an accounting term used to describe the goods in various stages in the…

Q: How is inventory turnover calculated, and what does it measure?

A: Inventory turnover ratio: This is a financial measure that is used to evaluate as to how many times…

Q: is a measure of inventory profitability that relates a gross margin to the cost of the inventory.

A: Inventory profitability means profits related to inventory cost which are calculated using these two…

Q: Explain whether the physical inventory should be equal to the amount indicated by the inventory…

A: Solution Concept Perpetual inventory system : The inventory system where the inventory records are…

Q: Explain the four GAAP inventory methods and state which is the most accurate.  Explain which will…

A: Inventory Valuation:   The valuation of merchandise inventory figure depends on the quantity of…

Q: Consider each of the following independent situations. Should a company report the goods in its…

A: If the seller expects a sales return, then it should debit sales return and credit refund liability…

Q: FIFO method to determine its cost of inventory.

A: Under FIFO method of inventory valuation, goods come first into the store are sold first.

Q: Determine ending inventory by applying the retail inventory method.

A: Retail inventory method: It takes into account all the retail amounts that is, the current selling…

Q: Which inventory cost appears as a Cost of goods sold in an Income statement under FIFO method?

A: “First-In, First-Out” is a method used for cost flow assumption purposes in the cost of goods sold…

Q: what is the amount allocated to ending inventory on a LIFO basis?

A: Using the LIFO method, the last purchased units are sold first. Periodic inventory records inventory…

Q: Explain how inventory is used and understand what it costs.

A: Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions…

Q: Comparing FIFO and LIFO, which one provides the more meaningful measure of ending inventory?

A: FIFO: Under this method, ending inventory is valued at the latest price and Merchandise sold are…

Q: Define the term inventory shrinkage. How is the amount of inventory shrinkage determined in a…

A: Inventory Shrinkage refers to that amount of inventory which is in excess and listed in the…

Q: Explain the types of inventory and the differences between a perpetual inventory system and a…

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Q: Explain what is meant by the cost rule or net realizable value, whichever is less, and how it is…

A: As per IAS -02 inventory should be measured on cost or Net realizable value whichever is lower.…

Q: Both the gross profit method and the retail inventory method provide a way to estimate ending…

A: Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during…

Q: When using the periodic inventory system and weighted-average inventory costing method, when is the…

A: Periodic inventory system: The method or system of recording the transactions related to inventory…

Q: What is the purpose of disclosing the difference between the reported LIFO inventory amounts and…

A: Perpetual and periodic inventory system: In merchandise business, there are two types of inventory…

Q: How is the net cost of inventory calculated?

A: Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a…

Q: Explain the inventory accounting system.

A: Inventory accounting is the body of accounting that used to valuing and accounting for changes in…

Q: Explain how to estimate the average cost of inventory when using the retail inventory method.

A: Retail inventory method: It takes into account all the retail amounts that is, the current selling…

Q: Discuss the primary difference between U.S. GAAP and IFRS with respect to determining the cost of…

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Q: List and explain the substantive tests of Inventory and give example.

A: Substantive procedures are exercised by an auditor to detect material misstatements at the financial…

Q: Describe the calculation of the cost of goods sold when using the periodic inventory system.

A: Periodic inventory system: The method or system of recording the transactions related to inventory…

Q: FIFO, Average cost, and LIFO are often used for inventory valuation purposes. Compare these methods…

A: Comparison between FIFO, Average Cost, and LIFO: FIFO: The first-in, first-out (FIFO) accounting…

Q: Explain the gross profit method of estimating ending inventory.

A: Gross Profit: It refers to the difference between the sales and the cost of goods sold.

Q: Provide a critique of the accounting policy for inventory included in the financial statement in…

A: The accounting standard prescribes the accounting treatment for inventories and sets the guidelines…

Q: Explain the term inventory turnover ratio.

A: Definition:   Ratio analysis: One of the techniques of financial statement analysis is ratio…

Q: Explain the retail inventory method of estimating ending inventory.

A: Retail inventory method takes into account all the retail amounts that is, the current selling…

Q: Briefly contrast the accounting procedures in perpetual andperiodic inventory systems.

A: Following are the differences between accounting procedures in perpetual and periodic inventory…

Q: nventory valuation is used to calculate the cost of goods sold and cost of ending inventory. The…

A: First in First out Method This is one of the popular method of inventory valuation.  While using…

Q: Which of the following inventory method measures most closely the current cost of inventory?   a.…

A: The inventory valuation is carried out at the end of the accounting period. The different inventory…

Q: The inventory valuation method which assumes that the items purchased first are the first items to…

A: Valuation of an inventory depends upon which items are sold first in the inventory cycle. This gives…

Q: Define weighted average inventory valuation method

A: There are 7 different method of issue of inventory, 1. First in First Out 2. Last in first out 3.…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.