The gross profit technique implies that A. The value of the inventory has not grown from prior years. B. The gross profit remains at the same level as in previous years. C. The correlation between sales and gross profit is consistent over time. D. Compared to prior years, neither sales nor cost of items sold have changed.

The gross profit technique implies that A. The value of the inventory has not grown from prior years. B. The gross profit remains at the same level as in previous years. C. The correlation between sales and gross profit is consistent over time. D. Compared to prior years, neither sales nor cost of items sold have changed.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 13GI: What is the basic assumption underlying the gross profit method? How may the gross profit percentage...

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Which of the following indicates a positive trend for inventory management? A. increasing number of days sales in inventory ratio B. increasing inventory turnover ratio C. increasing cost of goods sold D. increasing sales revenue
Bhushan Company has been using LIFO for inventory purposes because it would prefer to keep gross profits low for tax purposes. In its second year of operation (20-2), the controller pointed out that this strategy did not appear to work and suggested that FIFO cost of goods sold would have been higher than LIFO cost of goods sold for 20-2. Is this possible? REQUIRED Using the information provided, compute the cost of goods sold for 20-1 and 20-2 comparing the LIFO and FIFO methods.
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What is the basic assumption underlying the gross profit method? How may the gross profit percentage for the prior year be modified to provide a better estimate of the inventory value?
The use of the gross profit method assumes A. Inventory values have not increased from previous years. B. The amount of gross profit is the same as in prior years. C. The relationship between gross profit and sales remains stable over time. D. Sales and cost of goods sold have not changed from previous years.
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