ACC 304 All Assignments ACC 304 All Assignments | Page 105

on the commitment in the period in which the market decline takes
place.
11. When a buyer enters into a formal, noncancelable purchase
contract, an asset and a liability are recorded at the inception of the
contract.
12. The gross profit method can be used to approximate the dollar
amount of inventory on hand.
13. In most situations, the gross profit percentage is stated as a
percentage of cost.
14. A disadvantage of the gross profit method is that it uses past
percentages in determining the markup.
15. When the conventional retail method includes both net markups
and net markdowns in the cost-to-retail ratio, it approximates a lower-
of-cost-or-market valuation.
16. In the retail inventory method, the term markup means a
markup on the original cost of an inventory item.