Acc 205 Assignment Accounting

ACC 205

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. Answer the following questions (refer back to Chapter 5 if necessary):

1. Which type of inventory system will you use? Give your reason. (p. 255)

I would use the perpetual inventory system because it keeps a “running record of inventory and cost of goods sold.” (Horngren & Harrison, 2007, p 256). With the business as large as Bed Bath & Beyond there is no other system that at this time could possibly be used due to the mass inventory and sales.

2. Show how to compute net purchases and net sales. (pp. 260–263)

Net Purchases Net Sales

- Purchases Returns and Allowances - Sales Returns and Allowances

- Purchase Discounts____________ - Sales Discounts

= Net Purchases - Sales________________

= Net Sales

How will you treat the cost of transportation-in? “Freight In FOB Shipping point means buyer pays the freight. The buyer owns the goods while they are in transit, so the buyer pays the freight.” (Horngren & Harrison, 2007, p 259). So it becomes part of the cost of the inventory which then increases your cost of inventory so it would be debited to the inventory account.

3. How often do you plan to do a physical count of inventory on hand? What will the physical count accomplish? (pp. 266–267)

You do a physical count of the inventory once a year to determine the...