The Retail Inventory Method Is Based on the Assumption That

question 166

Multiple Choice

The retail inventory method is based on the assumption that the

• A) final inventory and the total of goods available for sale contain the same proportion of high-cost and low-cost ratio goods.
• B) ratio of gross margin to sales is approximately the same each period.
• C) ratio of cost to retail changes at a constant rate.
• D) proportions of markups and markdowns to selling price are the same.

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Definitions:

Credit Balance

A credit balance occurs when the total credits in an account exceed the debits, often seen in liability, revenue, and equity accounts.

Capital Account

An account on a company's balance sheet that represents the owners' stake or equity in the company.

Debit Balance

A financial situation where the total sum of debits in an account exceeds the total sum of credits, indicating assets or expenses.

Utility Company

A company that provides essential public services, including electricity, gas, water, and sewage services.