Final answer:
The gross profit method of estimating ending inventory is not acceptable due to potential inaccuracy from using historical gross profit rates, which may not reflect current conditions like price changes or extraordinary events.
Step-by-step explanation:
The question pertains to the gross profit method of estimating ending inventory and its acceptability. The gross profit method estimates ending inventory based on a company's historical gross profit rate. It takes the cost of goods sold, applies the historical gross profit percentage to estimate the cost of goods available for sale, and then subtracts the cost of goods sold to estimate ending inventory. However, it is not considered acceptable because it can lead to inaccurate results if there are significant deviations from the historic gross profit rate. Such deviations might occur because of changes in price levels, product mix, or any extraordinary events affecting the business. Because the method uses estimates rather than physical counts or perpetual inventory systems, there is room for inaccuracy and manipulation.