Under the retail inventory method:
A) A company measures inventory on its balance sheet by converting retail prices to cost.
B) A company measures inventory on its balance sheet at current selling prices.
C) A company measures inventory on its balance sheet on a LIFO basis.
D) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

The retail inventory method involves converting the total retail value of inventory to its cost value by applying a cost-to-retail ratio. This allows a company to value its inventory on its balance sheet at cost rather than at current selling prices (B) or on a LIFO basis (C). Therefore, option A is the best choice.

Under the Retail Inventory Method