Which statement is true about the gross profit method of inventory valuation?
A)It can be used as a substitute for the annual physical count of inventory.
B)It assumes past percentages are appropriate for the current period.
C)It uses mark-ups but not markdowns.
D)It is designed to approximate inventory valuation at the lower of cost and market.

Question

Quizplus · Accepted Answer

The gross profit method of inventory valuation assumes that past percentages of gross profit are appropriate for the current period. It cannot be used as a substitute for the annual physical count of inventory, it uses both mark-ups and markdowns, and it is not specifically designed to approximate inventory valuation at the lower of cost and market.

Which Statement Is True About the Gross Profit Method of Inventory