Accounting For Merchandising Operations

Accounting For Merchandising Operations

Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of European mixers. The owner of  a supply Company has approached Natalie to become the exclusive distributor of these fine mixers in her state. The current cost of a mixer is approximately $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified.

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Natalie has come to you for your advice on how to account for these mixers and asks you the questions below, which you must address.

 

  1. Would you consider these mixers to be inventory, or should these mixers be classified as supplies or equipment?
  2. Which inventory tracking system should Natalie use: perpetual or periodic?
  3. Which system do you think is better: perpetual or periodic?
  4. Which system would you recommend for the type of inventory that Natalie wants to sell?
  5. How often does Natalie need to count inventory if she maintains it using the perpetual system? In contrast, does she need to count inventory at all?

 

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