With a small team of classmates, visit one or more merchandising businesses in your area...

With a small team of classmates, visit one or more merchandising businesses in your area, Interview a responsible official of the company to learn about its inventory policies and accounting system. Obtain answers to the following questions, write a report, and be prepared to make a presentation to the class if your instructor so directs.

Requirements

1. What merchandise inventory does the business sell?

2. From whom does the business buy its inventory? Is the relationship with the supplier new or longstanding?

3. What are the FOB terms on inventory purchases? Who pays the freight, the buyer or the seller? Is freight a significant amount? ‘What percentage of total inventory cost is the freight?

4. What are the credit terms on inventory purchases—2/10, n/30, or other? Does the business pay early to get purchase discounts? If so, why? If not, why not?

5. How does the business actually pay its suppliers? Does it mail a check or pay electronically? What is the actual payment procedure?

6. Which type of inventory accounting system does the business use—perpetual or periodic? Is this system computerized?

7. How often does the business take a physical count of its inventory? When during the year is the count taken? Describe the count procedures followed by the company.

8. Does the manager use the gross profit percentage and the rate of inventory turnover to evaluate the business? If not, show the manager how to use these ratios in decision making.

9. Ask any other questions your group considers appropriate.