The gross margin method of estimating inventory is inappropriate when:
A) A general price decline occurred during the year.
B) Beginning inventory is zero.
C) Some of the inventory is destroyed.
D) Inventory increased by a material amount during the year.
E) Reporting in external financial statements.

Question

Quizplus · Accepted Answer

The gross margin method is not appropriate for external financial reporting because it provides only an estimate of inventory, not an actual count or valuation.

The Gross Margin Method of Estimating Inventory Is Inappropriate When