Which Statement Best Explains the Difference Between the Retail Inventory

question 20

Multiple Choice

Which statement best explains the difference between the retail inventory and gross margin methods?

• A)The gross margin method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period.
• B)The gross margin method estimates ending inventory cost using retail prices and an average gross margin.
• C)The retail inventory method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period.
• D)The retail inventory method estimates ending inventory cost using purchase prices and an average gross margin.

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Definitions:

Savings Account

A bank account where money can be deposited to earn interest over time.

Deposited

The act of placing money into a financial institution or account for safekeeping or to earn interest.

Present Amount

The present value of an anticipated amount of money or series of cash flows, assessed by a predetermined rate of return.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.