Explain about gross margin method, Accounting Basics

Assignment Help:

Q. Explain about Gross margin method?

The steps in computing ending inventory under the gross margin method are

- Estimate gross margin based on net sales using the similar gross margin rate experienced in prior accounting periods.

- Determine approximate cost of goods sold by deducting estimated gross margin from net sales.

- Determine approximate ending inventory by deducting estimated cost of goods sold from cost of goods available for sale.
Therefore the gross margin method estimates ending inventory by deducting estimated cost of goods sold from cost of goods available for sale.

The gross margin method presumes that a fairly stable relationship exists between gross margin and net sales. In other words gross margin has been a reasonably constant percentage of net sales and this relationship has continued into the current period. If this percentage relationship has changed the gross margin method doesn't yield satisfactory results.


Related Discussions:- Explain about gross margin method

Audit Reports, Why it is important for independent auditor to be a member o...

Why it is important for independent auditor to be a member of a professional body?

A baker makes 500 cream-filled eclairs at a cost of $0.72 e, A baker makes ...

A baker makes 500 cream-filled eclairs at a cost of $0.72 each. He estimates that 10% of the eclairs will be sold the following day at a reduced price of $0.80 each. Find the mar

Bank reconciliation, The cash records and bank statement for the month of M...

The cash records and bank statement for the month of May for Diaz Entertainment are shown below. Prepare the bank reconciliation and record cash adjustments (LO5) Additi

Suspense account, Which type of error would cause an entry in the suspense ...

Which type of error would cause an entry in the suspense account? A. A page total from the purchases journal was posted as $9780 rather than the correct figure of $9870. B. C

What is invoice, Q. What is invoice? An invoice is a document prepared ...

Q. What is invoice? An invoice is a document prepared by the seller of merchandise as well as sent to the buyer. The invoice contains the details of a sale such like the number

Choosing an accounting career, Q. Choosing an accounting career? How co...

Q. Choosing an accounting career? How companies have a choice in inventory cost methods among specific identification, LIFO, FIFO and weighted-average. Likewise one of the grea

Accounting Principles, what are the implications of applying accounting con...

what are the implications of applying accounting concepts wrongly

Could the choice of recording a capital asset impairment, Could the choice ...

Could the choice of recording a capital asset impairment or not, impact the financial statements significantly? Explain.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd