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Unformatted text preview: inventory for filing a claim with the insurance company. The gross profit method for estimated inventory uses the information from the top portion of a merchandisers multiple-step income statement. The gross profit method should be used when a physical inventory count is not possible. The retail method is mainly used by retailers who have their merchandise records in cost and retail selling prices. The retail method allows for an assessment of inventory at any time and produces a comparison of the estimated ending inventory against the physical ending inventory, at retail prices. The main difference between the gross profit and retail method is that the gross profit method uses historical gross profit rates and the retail method uses percentage markup from the current period. Since the gross profit method uses information from the past, the retail inventory method is best because it uses current information. Having mentioned this, the gross profit method is less reliable....
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- Spring '10