Decision Case -
Assume you are opening a Bed Bath & Beyond 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.
Requirements - Answer the following questions:
1. Which type of inventory system will you use? Give your reason.
2. Show how to compute net purchases and net sales. How will you treat the cost of transportation-in?
3. How often do you plan to do a physical count of inventory on hand? What will the physical count accomplish?
4. Inventory costs are rising. Which inventory costing method will you use in order to: a. maximize net income? b. pay the least amount of income tax?
Financial Statement Case -
The notes are an important part of a company's financial statements, giving valuable details that would clutter the tabular data presented in the statements. This case will help you learn to use a company's inventory notes. Refer to the 2009 Amazon Financial Statements handout and answer the following questions:
Requirements -
1. How much was the Amazon merchandise inventory at December 31, 2009? At December 31, 2008?
2. Which cost method does Amazon use for inventories? How does Amazon value its inventories? See Note 1.
3. By rearranging the cost-of-goods-sold formula, you can compute purchases, which are not reported in the Amazon statements. How much were Amazon's inventory purchases during 2009?