Estimating Inventory Using the Gross Profit Method

The gross profit or gross margin method uses a company’s gross margin percent to estimate the ending inventory. This method assumes that a company maintains approximately the same gross margin from year to year. Inventories estimated in this manner are frequently used for interim reports and insurance claims; however, this method is not acceptable for inventory valuation on a company’s annual financial statements.

[Summyr]

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[pablodiaz]

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