The gross profit method is an excellent method to determine the cost of inventory for interim financial statements. The method of estimation must be disclosed.

Question

Quizplus · Accepted Answer

The statement is true. The gross profit method can be used for interim financial statements, but it is important to disclose that it is an estimation method. This is because the gross profit method requires assumptions and estimates for the cost of goods sold, which can affect the accuracy of the inventory cost calculation. Full disclosure helps to prevent any misunderstandings or misinterpretations of the financial statements by the users.

The Gross Profit Method Is an Excellent Method to Determine