BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Control of inventories

Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to .switch to a perpetual inventory system.

Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory’ levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand.

Kevin is also concerned about lost sales while a physical inventory is being taken. Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count.

Will switching to a perpetual inventory system strengthen Triple Creek Hardware’s control over inventory items? Will switching to a perpetual inventory system eliminate the need for a physical inventory count? Explain.

To determine

Control over inventory is a technique whereby the inventory is safeguarded as soon as the order of inventory is made. The two main objectives of control of inventory are:

  1. a) Safeguarding of inventory from theft and damage
  2. b) Recording and reporting inventory in the financial statement of the company.

Physical inventory is the actual inventory which can be counted tangibly. Usually, at the end of each accounting period, company makes the count of physical inventory. It contains the particulars of inventories like, number count, volume, weight, and measures for all types of inventories.

To discuss: the effect of switching to perpetual inventory system by TC Store for having adequate control over inventory items.

Explanation

When TC Store switches to perpetual inventory system, it would strengthen the internal control over inventory. This is because that, the managers of the store will be able to keep a record as how much of each item is lying in hand. This would minimalize shortages of frequent selling goods and excess leftover of goods which are poor selling inventories...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is the purpose of the Americans with Disabilities Act?

Foundations of Business (MindTap Course List)

Why is productivity important?

Essentials of Economics (MindTap Course List)

When should a standard cost variance be investigated?

Managerial Accounting: The Cornerstone of Business Decision-Making

How is a change in depreciation method accounted for? Why?

Intermediate Accounting: Reporting And Analysis

Identify three types of businesses according to activities.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S costs 15,000, and its expected cash flows wou...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What is an environmental cost?

Cornerstones of Cost Management (Cornerstones Series)