Which statement is correct about the retail inventory method?
A)It represents a cost flow assumption.
B)It estimates cost of goods sold by applying an average gross margin to the amount of sales recorded in the period.
C)It can misstate inventory values if unreliable information is used about profit margins.
D)It provides direct information about actual cost of goods sold or ending inventory.

Question

Quizplus · Accepted Answer

The retail inventory method can misstate inventory values if unreliable information is used about profit margins, as it relies on estimates rather than actual cost data.

Which Statement Is Correct About the Retail Inventory Method