Opening a Furniture Store and Financing the Business
Assume you are opening a furniture store. To finance the business, you need a $500,000 loan, and your banker requires a set of forecasted financial statements. Assume you are preparing the statements and must make some decisions about how to do the accounting for the business.
Answer the following questions:
Which type of inventory system will you use: perpetual or periodic? Explain your reason.
How often do you plan to do a physical count of inventory on hand?
What will the physical count accomplish?
Inventory costs are rising. Which inventory costing method would have the effect of maximizing net income and minimizing the amount of income tax?