Companies with periodic inventory systems often use techniques such as the gross profit method and the retail method to:
A)Prepare interim financial statements without taking a complete physical inventory.
B)Increase gross profit.
C)Value inventory at its sales price instead of its cost.
D)Reduce taxable income during a period of rising prices.

Question

Quizplus · Accepted Answer

Companies with periodic inventory systems do not keep a continual record of inventory levels and instead take physical counts periodically. The gross profit method and the retail method can be used to estimate the cost of goods sold and the ending inventory balance without needing to conduct a complete physical inventory. This allows companies to prepare interim financial statements without disrupting their regular business operations.

Companies with Periodic Inventory Systems Often Use Techniques Such as the Gross