Audio Visual Presentation: GB518: Financial Accounting Principles and Analysis

Continuing Cookie Chronicle 1

Continuing Cookie Chronicle

CCC5 – Inventory Decisions ( (Use this as the Level One heading in the Case Assignments)

Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is to become the exclusive distributor of a line of fine European mixers. The current cost of a mixer is approximately $550, and Natalie would sell each one for $1,100. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified.

Natalie asks you the following questions.

1. “Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?”

2. “I’ve learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?”

3. “How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?”

Instructions

(Use the 3 questions above to create BRIEF Level Two subheadings)

Using the information that you have gathered and the adjusted trial balance from December, plus the new information above, do the following:

Answer Natalie’s 3 questions.