Which Statement Is Correct About the Retail Inventory Method

question 35

Multiple Choice

Which statement is correct about the retail inventory method?

• A)It represents a cost flow assumption.
• B)It estimates cost of goods sold by applying an average gross margin to the amount of sales recorded in the period.
• C)It can misstate inventory values if unreliable information is used about profit margins.
• D)It provides direct information about actual cost of goods sold or ending inventory.

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Definitions:

Saving

The process of setting aside a portion of current income for future use or for investment purposes.

Consumption Tax

Taxes applied on spending on goods and services, such as sales tax or Value Added Tax (VAT).

Income Tax

A tax levied by governments on individuals' or entities' income. The rate can vary based on income levels or earnings.

Average Tax Rate

The proportion of total income that is paid as tax, calculated by dividing the total amount of taxes paid by the taxpayer's total income.