Financial & Managerial Accounting 3rd Edition by Charles Horngren,Harrison, Walter,Suzanne Oliver

Exercise 9

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