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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?