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 cost of goods sold from the cost of goods available for sale.

Question

Quizplus · Accepted Answer

This statement is true. The gross profit method is a technique used to estimate the cost of ending inventory by applying the gross profit margin ratio to net sales. The formula is: (Net Sales - Cost of Goods Sold) / Net Sales = Gross Profit Margin Ratio. Then, the cost of ending inventory can be computed by subtracting the cost of goods sold from the cost of goods available for sale and multiplying that result by the gross profit margin ratio.

Under the Gross Profit Method, the Cost of the Ending