If a company estimates its ending inventory using the gross profit method, it does not have to take a physical inventory at the end of the year.

Question

Quizplus · Accepted Answer

The gross profit method requires that the cost of goods sold and the gross profit percentage are calculated, and then applied to the company's sales for the period to determine the estimated ending inventory. However, a physical inventory is still necessary to verify the accuracy of the estimated ending inventory and make any necessary adjustments.

If a Company Estimates Its Ending Inventory Using the Gross