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You are the financial officer of Music Plus, a retailer that sells goods for home entertainment...

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Accounting

You are the financial officer of Music Plus, a retailerthat sells goods for home entertainment needs. The business ownerrecently reviewed the annual financial statements that youprepared. He sent you an email stating that he thinks he overstatednet income. He explains that although this has invested a greatdeal of security systems, he is sure that shoplifting and otherforms of inventory shrinkage (damages, loss, etc.) have occurred,but he does not see any deduction for shrinkage on the incomestatement. The store uses a perpetual inventory system.

Required: Prepare a brief memo that responds to theowner's concerns.

2. Arrange an interview with the manager of a local retailstore. Explain that you are a student studying merchandisingactivities and the accounting for sales returns and allowances. Askthe manager what the store policy is regarding returns. Also, findout if sales allowance are negotiated with customers before given.Inquire whether management perceives that customers are abusingreturn policies and what actions management takes to counter thepotential abuses.

Answer & Explanation Solved by verified expert
3.6 Ratings (554 Votes)
Answer to Question No 1 MEMO Responding to Owners concerns MEMO MUSIC PLUS To Music Plus Store Owner From Financial Officer of Music Plus Date 15022019 Re Clarification regarding deduction for shrinkage on the income statement of Music Plus With reference to the subject above it is submitted that since we maintain our inventory by following Perpetual Inventory System ie by making an entry into the computer system on Online Real Time Basis we not only update the financial statements ie the income statement but also update the inventory in the store over time    See Answer
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