The ________ estimates inventory by using the format for cost of goods sold.
A)FIFO method
B)LIFO method
C)gross profit method
D)average cost method

Question

Quizplus · Accepted Answer

The gross profit method estimates inventory by using the gross profit percentage (gross profit divided by net sales) to calculate the cost of goods sold, and then subtracting that from net sales to calculate the estimated ending inventory. This method is often used when a company does not have a detailed inventory count available. The other methods listed (FIFO, LIFO, and average cost) all involve specific calculations based on the order in which inventory is purchased or sold, and require knowledge of the actual physical inventory on hand.

The ________ Estimates Inventory by Using the Format for Cost