Abstract
Tom Thumb Toys, Inc. is a company that will cater to children of all ages. The company structure is a retailer of toys, children's apparel, and baby products for children ranging in age from newborn to 80. Product groups consist of baby toys, strollers, educational assistance toys, computers, bicycles, motorized children¡¦s vehicles, and cribs. Each store will also contain a section that will consist of all types of candy, baby foods and formulas.
Prior to the opening of the first store, it is necessary to evaluate and begin policy implementation for inventory and capital expenditures. The Accounting team recommends that the following policies be published for the Tom Thumb Toys, Inc.
Introduction
Tom Thumb Toys, Inc. is located in Orlando Beach, Florida. A projected grand opening is scheduled for the first store on January 1, 2005. In order for the store to be successful, many accounting issues have to be resolved. First is the inventory policy for all products being that are sold in each store. The Accounting team has determined that utilizing the weighted average method and FIFO (first-in, first-out) methods best suit the company¡¦s products.
The second major decision to be made was the capitalization policy for the computer systems, buildings and other equipment. Capital expenditures usually represent; (a) large dollar expenditures; (b) are fixed commitments that usually cannot be canceled without serious penalties; (c) have large impacts on the operating budget and (d) have costs and benefits that may be difficult to measure accurately because their useful life may extend several years into the future.
Inventory Policy
All toy inventories for Tom Thumb Toys utilize the weighted average method for invento ...