Which of the Following Statements with Respect to the Gross

question 77

Multiple Choice

Which of the following statements with respect to the gross profit method of estimating inventory is not correct?

• A)This method is sometimes used by auditors to confirm a physical count.
• B)The use of this method eliminates the need for performing an actual inventory count.
• C)This method utilizes the interrelationship between the accounts used in the cost of goods sold calculation.
• D)It may be used to estimate ending inventory when inventory has been destroyed.

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Definitions:

Right of Refusal

A contractual right that gives an individual or entity the opportunity to enter a business transaction with another party before anyone else can.

Perfect Tender Rule

The requirement that a seller deliver goods in conformity with the contract, down to the last detail.

Rigidity

The quality of being unable to bend or be forced out of shape; lack of flexibility or adaptability.

Honesty in Fact

The genuine belief or actual state of mind devoid of intent to deceive or defraud.