you are the financial officer for music plus, a retailer that sells goods for ho

Question

you are the financial officer for music plus, a retailer that sells goods for home entertainment needs. the business owner, Jamie Madsen recently reviewed the annual financial statements you prepare and sent you an email stating that he thinks you overstated net income. He explains that although he has invested a great deal in security, he is sure shoplifting and other forms of inventory shrinkage have occurred, but he does not see any deduction for shrinkage on the income statement. The store uses a perpetual inventory system. prepare a brief memorandum that responds to the owner's concerns.

Explanation / Answer

basically, if the owner thinks there was shoplifting income decreases, then it means they need to invest in more security. either raising the prices of the goods to benefit more income to not only replace the stolen goods, but also to gain more security so that the decrease of income from shrikage or shoplifting wont occur. or, getting rid of some goods to gain more security, so basically having to lower prices on some goods, sacrificing the income increase of those goods. like, either way youre losing & gaining.

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