Which statement is NOT true about the gross profit method of inventory valuation?
A) It may be used to estimate inventories for interim statements.
B) It may be used to estimate inventories for annual statements.
C) It may be used by auditors.
D) It may be used to provide a rough check on the accuracy of the physical inventory count.

Question

Quizplus · Accepted Answer

The gross profit method is suitable for estimating inventory for interim statements, providing a rough check on the accuracy of the physical inventory count, and may be used by auditors. However, it is not recommended for valuing inventories for annual statements as it is based on assumptions and estimates rather than actual values. It is also not allowed by Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) for annual statements.

Which Statement Is NOT True About the Gross Profit Method