The gross margin method of estimating inventories may be used in the preparation of interim reports; however, the lower-of-cost-or-market rule may not be applied to inventory costs determined by the gross margin method.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market rule can be applied to inventory costs determined by the gross margin method, as this rule is a conservative approach to inventory valuation that can be used regardless of the method used to estimate inventory costs.

The Gross Margin Method of Estimating Inventories May Be Used