Under the retail inventory method:
A)A company measures inventory on its balance sheet by converting retail prices to cost.
B)A company measures inventory on its balance sheet at current selling prices.
C)A company measures inventory on its balance sheet on a LIFO basis.
D)None of these is correct.

Question

Quizplus · Accepted Answer

The retail inventory method involves converting the retail prices of inventory to their cost using a cost-to-retail percentage. This allows a company to measure inventory at cost on their balance sheet. Option B is incorrect because inventory is not measured at current selling prices. Option C is incorrect because LIFO is a specific inventory costing method and is not related to the retail inventory method.

Under the Retail Inventory Method