The first step in using the gross profit method to estimate ending inventory is to:
A)calculate the cost of goods available for sale.
B)estimate the ending inventory.
C)estimate the beginning inventory.
D)estimate the cost of goods sold.

Question

Quizplus · Accepted Answer

The gross profit method requires the calculation of the cost of goods sold before the estimation of the ending inventory. To calculate the cost of goods sold, we must first determine the cost of goods available for sale, which includes the beginning inventory and all purchases made during the accounting period. Therefore, the first step in using the gross profit method is to calculate the cost of goods available for sale.

The First Step in Using the Gross Profit Method to Estimate