Final answer:
The gross profit method of estimating inventory is acceptable for interim financial reports but not for annual financial reports, which require more precise inventory valuation. Therefore, the correct answer is 'True for interim reports only'.
Step-by-step explanation:
The gross profit method of estimating inventory is a technique used by businesses for calculating inventory levels without a physical count.
This method is based on the gross profit margin, which is assumed to remain consistent over time.
While this method offers a quick way to estimate inventory, it may not always provide the most accurate results due to potential fluctuations in gross profit margin and is therefore typically used for interim reports rather than for annual financial reports, which require greater accuracy.
Given this context, the correct answer to whether the gross profit method of estimating inventory is acceptable for both interim and annual financial reports is c) True for interim reports only.
Annual reports are expected to be more precise and are usually based on a physical inventory count or other accurate methods.
The gross profit method of estimating inventory is acceptable for interim financial reports but not for annual financial reports, which require more precise inventory valuation. Therefore, the correct answer is 'True for interim reports only'.