The gross profit method of inventory valuation is NOT suitable when
A)a portion of the inventory is destroyed.
B)there is a substantial increase in inventory during the year.
C)there is no beginning inventory because it is the first year of operation.
D)the gross profit percentage applicable to the goods in ending inventory is different from the
Percentage applicable to the goods sold during the period.

Question

Quizplus · Accepted Answer

The gross profit method assumes a consistent gross profit percentage. If the percentage differs between goods sold and those in ending inventory, the method becomes inaccurate.

The Gross Profit Method of Inventory Valuation Is NOT Suitable