Which of the following is not a basic assumption of the gross profit method?
A) The beginning inventory plus the purchases equal total goods to be accounted for.
B) Goods not sold must be on hand.
C) If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result is the amount of inventory on hand.
D) The total amount of purchases and the total amount of sales remain relatively unchanged from the comparable previous period.

Question

Quizplus · Accepted Answer

The gross profit method is based on the assumption that the gross profit margin remains relatively constant, which allows for the estimation of the cost of goods sold and ending inventory. However, it does not assume that the total amount of purchases and sales remain unchanged from a previous period. This assumption is not necessary for applying the gross profit method, as it focuses on the gross profit rate rather than the total amounts of purchases or sales.

Which of the Following Is Not a Basic Assumption of the Gross