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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Describe five situations in which the gross profit method of estimating inventory would be useful.

To determine

Indicate the five situations in which the gross profit method of estimating inventory is useful.

Explanation

Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during the period which results in the goods available for sale. Then, the estimated cost of goods sold is deducted from the goods available for sale to estimate the ending inventory.

Following are the situations in which the gross profit method of inventory estimation would be useful:

  • To calculate the cost of inventory for the interim financial statement, gross profit method is acceptable when compared to physical count, as long as the method is disclosed...

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