Inventory estimation methods

1) Under what circumstances must a company estimate its inventory? What are the differences between using the gross profit method and the retail inventory method for estimating inventory?


2) Which method of estimation is best: gross profit or retail inventory? Explain your answer.

3) In your opinion, how would the AICPA adoption of International Accounting Standards potentially affect how American companies value inventory? Explain.

4) What are the criteria for capitalization of fixed assets? What items are included in the cost of a fixed asset? Should interest be included in the cost of a fixed asset? Explain why or why not.