Why would a company use the gross profit method to estimate ending inventory? (Select all...
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Why would a company use the gross profit method to estimate ending inventory? Select all that apply. Question content area bottom Part A It is common to estimate its ending inventory using the gross profit method when inventory is damaged and an estimated value must be used to file insurance claims. B When auditors are testing the overall reasonableness of inventory amounts reported by clients. C If monthly or quarterly financial statements have to be prepared but the cost of a full physical inventory several times per year would be prohibitive. D In many cases inventory estimates are used in a first pass valuation for a potential acquirer in a merger deal. E When annual audited financial statements have to be prepared but the management decides they do not want to perform a physical inventory.
Why would a company use the gross profit method to estimate ending inventory? Select all that apply.
Question content area bottom
Part
A
It is common to estimate its ending inventory using the gross profit method when inventory is damaged and an estimated value must be used to file insurance claims.
B
When auditors are testing the overall reasonableness of inventory amounts reported by clients.
C
If monthly or quarterly financial statements have to be prepared but the cost of a full physical inventory several times per year would be prohibitive.
D
In many cases inventory estimates are used in a first pass valuation for a potential acquirer in a merger deal.
E
When annual audited financial statements have to be prepared but the management decides they do not want to perform a physical inventory.
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