The cost method of accounting does not enable a retailer to determine gross profit until _____.

Question

Quizplus · Accepted Answer

The cost method of accounting requires a physical inventory to be undertaken before gross profit can be determined, as the method values inventory based on the cost of the goods at the time they were purchased or acquired. Only after a physical inventory is taken can the retailer determine the cost of goods sold and, ultimately, the gross profit. Tax determination, cost determination, and retail price determination are all irrelevant to the calculation of gross profit under the cost method.

The Cost Method of Accounting Does Not Enable a Retailer