9. Which statement is true about gross profit method?

a) Cost of goods sold is subtracted from goods available to determine estimated ending inventory.

b) Uses cost % by dividing goods available at cost by goods available at retail

c) Layering inventory with the application of price indexes

d) Price index is applied to inventory at retail then a cost percent is applied to layers

10. The Dec 31 physical inventory of Lightup Inc discovered that $ 1000 of inventory purchased during the year had not been included in ending inventory. What effect will this error have on assets, liabilities, retained earnings, and net income?

a) Understate, no effect, understate, understate

b) No effect, understate, understate, overstate

c) No effect, overstate, understate, understate

d) no effect, understate, overstate, overstate

11. Assuming that beginning inventory in overstated by $ 200, ending inventory is understated by $ 600, which of the following is true?

a) Net income is understated by 400

b) Net income is understated by 800

c) Cost of goods sold is understated by 800

d) Cost of goods sold is overstated by 400