Which Statement Is True About the Gross Profit Method of Inventory

question 88

Multiple Choice

Which statement is true about the gross profit method of inventory valuation?

• A)It can be used as a substitute for the annual physical count of inventory.
• B)It assumes past percentages are appropriate for the current period.
• C)It uses mark-ups but not markdowns.
• D)It is designed to approximate inventory valuation at the lower of cost and market.

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Definitions:

Current Cost

The amount of money that would have to be paid currently to replace an asset or to purchase a service.

Net Realizable Value

The estimated selling price of goods, minus the cost of their sale or completion.

Exit Value

The estimated amount that an asset or investment could be sold for at the end of its useful life.

Economic Resource

Assets or inputs that have the potential to contribute to the production of goods and services, providing economic benefit to businesses or individuals.