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Explain the use of estimate in inventory valuation

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Reference no: EM133057121

Question - Please answer each item. The book reference is Intermediate Accounting 1 by Valix. Topic: Gross Profit Method

1. Explain the use of estimate in inventory valuation.

2. What is the basic formula for the gross profit method.

3. Explain the "normal" computation of cost of goods sold.

4. Why is the method called "gross profit method"?

5. Explain the computation of cost of goods sold under the gross profit method.

6. What are the two kinds of gross profit rate?

7. Explain cost ratio and sales ratio in relation to the gross profit method.

8. What is the gross profit rate on cost if the gross profit rate is 25% on sales?

9. What is the gross profit rate on sales if the gross profit rate is 66 2/3 on cost?

10. Explain the treatment of sales allowance and sales discount in relation to the gross profit method.

Reference no: EM133057121

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