For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the ending inventory value for:
A) Interim Reporting, No; Annual Reporting, No
B) Interim Reporting, No; Annual Reporting, Yes
C) Interim Reporting, Yes; Annual Reporting, No
D) Interim Reporting, Yes; Annual Reporting, Yes

Question

Quizplus · Accepted Answer

For interim reporting purposes, it is appropriate to use estimated gross profit rates to determine the ending inventory value because it provides a practical approach to estimate inventory without a full physical inventory count, which may not be feasible or cost-effective to perform quarterly. However, for annual reporting, more accurate and reliable methods, such as a physical inventory count, are expected to ensure the financial statements are as accurate as possible.

For External Reporting Purposes, It Is Appropriate to Use Estimated