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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

List the three steps followed under the gross profit method of estimating inventory.

To determine

List the three steps followed under the gross profit method of estimating inventory.

Explanation

Gross Profit Method:

The method which uses “cost of goods sold” concept to estimate the “ending inventory value” is referred to as gross profit method or gross margin method.

List the three steps followed under the gross profit method of estimating inventory:

  • Calculate the cost of goods sold available for sale.
  • Cost of goods sold is calculated by deducting the normal gross profit from the net sales.
  • Ending inventory is calculated by deducting the cost of goods sold from the costs of foods available for sale.

Format of calculating ending inventor using the gross profit method:

ParticularsAmount ($)Amount ($)
Beginning inventory XXX
Add: Net purchases...

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