ACC-250 Week 5 DQ 2 – Chapter 6 Critical Thinking

ACC-250 Week 5 DQ 2 – Chapter 6 Critical Thinking: Decision Case 6-1

Financial Accounting – Merchandising and Inventory Accounting

Grand Canyon University

Respond to the following question, exercise, problem, or case in your textbook: “Chapter 6 Critical Thinking: Decision Case 6-1.” Use complete sentences, cite any sources used, and answer all required parts.

Decision Case 6-1

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 financials statements. Assume you are preparing the statements and must make some decisions about how to do the accounting for the business.

Requirements:

Which type of inventory system will you use: perpetual or periodic?

Show how to compute net purchases and net sales revenue.

How will you treat the cost of freight in?

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?

Minimizing the amount of income tax?