In the retail inventory method, abnormal shortages are deducted from both the cost and retail amounts and reported as a loss.

Question

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Abnormal shortages are deducted from both the cost and retail amounts in the retail inventory method to adjust for any losses or shrinkage. The adjusted values are then used to calculate the ending inventory value. The abnormal shortages are reported as a loss in the financial statements.

In the Retail Inventory Method, Abnormal Shortages Are Deducted from Both