In which of the following cases would the gross profit method most likely be used?
A)In a company with good accounting records
B)In applying the average-cost method
C)In estimating the market value of inventory for application of the lower-of-cost-or-market rule
D)In estimating an inventory loss from fire

Question

Quizplus · Accepted Answer

The gross profit method is most commonly used to estimate inventory losses from catastrophic events such as fire, theft, or flood. It is a quick and simple way to estimate the value of lost inventory based on the gross profit margins of previous periods. It is not typically used in cases where good accounting records are available, where average-cost method is being applied, or where lower-of-cost-or-market rule is being used.

In Which of the Following Cases Would the Gross Profit