When using the gross margin method to estimate inventory, which of the following is a step in the computation?
A)Add the amount goods available for sale to estimated cost of goods sold.
B)Add estimated gross margin to sales.
C)Subtract estimated cost of goods sold from the amount of goods available for sale.
D)Subtract estimated goods available for sale from beginning inventory.

Question

Quizplus · Accepted Answer

When applying the gross margin method, cost of goods sold is estimated based on actual sales multiplied by 1 minus the estimated (historic) gross margin percentage. Cost of goods sold is then subtracted from goods available for sale (beginning inventory plus purchases) to estimate ending inventory.

When Using the Gross Margin Method to Estimate Inventory, Which