Which of the Following Statements Concerning the Retail Inventory Method

question 34

Multiple Choice

Which of the following statements concerning the retail inventory method of estimating closing stock is incorrect?

• A) It can be applied with or without a physical stocktake being carried out.
• B) A stocktake is carried out, valued at retail and then converted to cost by applying the historical gross profit percentage.
• C) The ratio of cost to retail is goods available for sale at cost divided by the goods available for sale at retail.
• D) Differences in the mix of inventory compared to the mix used to determine the cost ratio does not affect the accuracy of the method.

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Definitions:

Previously Owned

Refers to items or assets that have been owned by another party before the current owner.

Loan Payment

The act of paying back a borrowed sum of money to a lender, typically including both principal and interest components.

Compounded Quarterly

The process of applying interest to both the initial principle and the accumulated interest from previous periods on a quarterly basis.

Withdrawals

Money taken out from a business by its owners for personal use or from an account by the account holder.