Response to the following :
Assume you are opening a clothing store that specializes in women's designer dresses. Each dress costs you anywhere from $200 to $500, and you plan to sell the dresses for $350 to $1,000 each.
To finance the business, you need a $50,000 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 :
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?