Under the gross profit method, the cost of the ending inventory is determined by applying the gross profit ratio to net sales and then subtracting the gross profit calculated from the cost of goods available for sale.

Question

Quizplus · Accepted Answer

The gross profit method estimates the cost of the ending inventory by applying the gross profit ratio to net sales to estimate the cost of goods sold, which is then subtracted from the cost of goods available for sale to estimate the ending inventory, not the other way around.

Under the Gross Profit Method, the Cost of the Ending