Posted: September 16th, 2017

TsIzzWe (Ts) is a company that purchases T shirts from the manufacturer, Frootyluums (Frooty) and sells them to college students through the college bookstore, Rskoolstore (RSkool). Ts has hired you to be the accountant for the company………

TsIzzWe (Ts) is a company that purchases T shirts from the manufacturer, Frootyluums (Frooty) and sells them to college students through the college bookstore, Rskoolstore (RSkool). Ts has hired you to be the accountant for the company.

PART 1:

Ts is concerned about paying taxes and has asked you to explain which inventory flow system would be the best one to use to minimize the taxes that are paid on the profits.

Based upon this request, which one would you recommend? Support your position by explaining the differences of the inventory flow systems.

PART 2:

Ts has decided to follow your advice and use the inventory flow method that you recommended with its perpetual inventory system. Using the data provided for transactions that occurred during August, determine the Gross Profit at the end of the period.

PART 3:

Ts had used the periodic inventory system prior to switching to the perpetual inventory system. Using the data provided for transactions that occurred during that time, determine the Gross Profit for that period using the Average Cost Inventory Flow Method.

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