A Way to Estimate the Cost of Ending Merchandise Inventory

question 41

True/False

A way to estimate the cost of ending merchandise inventory on the basis of the ratio of the goods available for sale at cost to the goods available for sale at retail is called the gross profit method.

---

Definitions:

Adjusting Journal Entry

A journal record used to adjust the balances in various ledger accounts to more accurately reflect income and expenses for the period.

Supplies Account

An account that tracks the cost of supplies not yet used by a business.

Adjusting Entry

An accounting entry made into a ledger after the end of the accounting period to allocate income and expenditure to the period in which they actually occurred.

Prepaid Rent

An expense that is paid in advance and recorded as an asset on the balance sheet until it is realized as an expense over time.