The gross profit method cannot be used for calculating inventory destroyed by a disaster,such as a fire.

Question

Quizplus · Accepted Answer

The gross profit method can be used to estimate the value of inventory destroyed by a disaster, such as a fire. The method involves estimating the gross profit percentage and using it to calculate the cost of goods sold, which can then be subtracted from the expected sales to arrive at an estimate of the inventory lost. However, it is important to note that this method is an estimation and may not reflect the actual value of the inventory lost.

The Gross Profit Method Cannot Be Used for Calculating Inventory