Which inventory valuation method is not permissible at the end of the year?

The estimation of inventory values is crucial for accurate financial reporting, and different methods can be used for this purpose. The estimated gross profit rate method, while useful for interim financial statements or budget forecasting, is not acceptable for year-end inventory valuation because it relies on estimations rather than actual transactions.

In contrast, the weighted average method, specific identification, and retail method all utilize more concrete financial data. The weighted average method assigns an average cost to inventory items, providing a systematic approach to inventory valuation. The specific identification method tracks the actual cost of each individual item, ensuring precise valuation reflective of actual spending. The retail method uses the relationship between cost and selling price to estimate inventory values, which is permissible as it aligns closely with the historical costs and margins.

The key reason the estimated gross profit rate method is not permissible for year-end inventory is because it does not rely on actual costs incurred, which is essential for accurate year-end financial reporting. This helps maintain the integrity and reliability of the financial statements prepared for stakeholders, reflecting true performance and position of the entity.