MAT 200 Module 6 Merchandising Operations Example

Course	MAT 200 Principles of Accounting I
Module	Module 6
Paper type	Merchandising accounting paper
Length	About 1,001 words, 6 pages
Format	APA 7 student paper
School	Aspen University
Program	Business Administration
Updated	October 2026

Free sample paper for MAT 200 Module 6

The $1,900 Gap: Merchandising Accounting, Shrinkage and Inventory Turnover at a Bike Shop

Student Name

Business Administration Program, Aspen University

MAT 200: Principles of Accounting I

Instructor Name

Month Day, Year

What this page is doingThe title names the inventory discrepancy the paper explains. APA 7 student title page.

The $1,900 Gap: Merchandising Accounting, Shrinkage and Inventory Turnover at a Bike Shop

June is the start of the riding season, and Prairie Spoke Cycles bought heavily for it. The shop uses a perpetual inventory system in its accounting software: each delivery adds to the inventory balance and each sale takes out the cost of what left the store, so the software always shows what ought to be on hand. At the end of June, Sam Whitaker and the bookkeeper, Lena Ortiz, counted everything in the store and the back room. The count came to $43,700; the records said $45,600. This paper records June's merchandising transactions, explains the gap and analyzes what the numbers say.

Perpetual and Periodic Systems

Under a periodic system, a business records purchases in a separate account and determines cost of goods sold only at the end of a period, by counting what is left. Under a perpetual system, it updates inventory with every transaction. Perpetual systems give up-to-date figures, which help with ordering and pricing, but they still need physical counts, because records can drift from reality.

June's Transactions

The shop bought $28,000 of bikes and parts on 2/10, net 30 terms: pay within ten days and keep 2% of the invoice, otherwise pay in full within thirty. It returned $800 of helmets that arrived with cracked shells, reducing inventory and accounts payable. It paid one $10,000 invoice within ten days, taking a $200 discount, which reduced the cost of the inventory. It sold $36,000 of merchandise; for each sale, the software recorded revenue and moved the items' cost from Inventory to Cost of Goods Sold, $21,600 in total.

	Amount
Inventory, June 1	40,200
Purchases	28,000
Less purchase returns	(800)
Less purchase discounts	(200)
Net purchases	27,000
Goods available for sale	67,200
Inventory per records, June 30	45,600
Cost of goods sold per records	21,600
Shrinkage, records less count	1,900
Cost of goods sold, adjusted	23,500

What this page is doingWithout the count, the shop would have overstated both its inventory and its gross margin by $1,900.

Key Journal Entries

Event	Debit	Credit	Amount
Purchase on 2/10, net 30	Inventory	Accounts Payable	28,000
Return of damaged helmets	Accounts Payable	Inventory	800
Payment within discount period	Accounts Payable 10,000	Cash 9,800; Inventory 200	10,000
Sales	Cash and Accounts Receivable	Sales Revenue	36,000
Cost of items sold	Cost of Goods Sold	Inventory	21,600
Shrinkage	Cost of Goods Sold	Inventory	1,900

Is the Discount Worth Taking?

A 2% discount for paying twenty days early sounds small, but it is equivalent to an annual interest rate of about 37%. Paying early is almost always worth it if the shop has the cash, and in June it did. Lena will set the software to flag every invoice still inside its discount period, since a missed discount is money lost without anyone noticing.

Recording the Shortfall

Lena moved the missing $1,900 out of the Inventory account and into Cost of Goods Sold, so the books now agree with what is physically in the store. Shrinkage is part of the cost of selling merchandise, whether it arises from theft, damage, miscounting or items received but never recorded.

How Common Inaccurate Records Are

DeHoratius and Raman (2008) studied nearly 370,000 inventory records across many stores of a large retailer and compared them with physical audits. About 65% of the records were inaccurate, and the inaccuracies were related to item characteristics such as cost and sales volume, with more variety and higher selling quantities associated with more errors. Their finding means Prairie Spoke's gap is not unusual. It also suggests where to look: high-volume, low-cost parts such as tubes, chains and lights are more likely to drift than bikes, which are tracked individually.

Gross Margin and Turnover

June's gross margin was $36,000 minus $23,500, or $12,500, 34.7% of sales. The margin differs by product line: new bikes carry margins around 30%, while parts and accessories run closer to 45%, so a month heavy in bike sales shows a lower overall margin even if nothing has gone wrong. Sam can ask the software to report margin by category each month, which would also show whether the shrinkage is concentrated in parts, as DeHoratius and Raman's findings would predict. Repair labor, which has no inventory cost, is reported separately and does not enter the merchandise margin. Annualizing June's cost of goods sold gives about $282,000; dividing by average inventory of $41,950 gives turnover of about 6.7 times a year.

Gaur et al. (2005) analyzed inventory turnover across U.S. retailers and found that it varied widely between firms and over time. Turnover was negatively related to gross margin, so higher-margin retailers held inventory longer, positively related to capital intensity and positively related to sales surprises, as unexpectedly strong sales pulled inventory down. The framework helps Sam interpret the numbers: a specialty bike shop with moderate margins should expect moderate turnover, and a strong June may have flattered it.

The Cost of Holding Too Much

Chen et al. (2005) studied the inventories of American manufacturing companies from 1981 to 2000 and found that inventories relative to sales declined over the period. Companies sitting on far more stock than peers saw weak share returns afterward, and those running a bit leaner than average fared better. For a small shop, the lesson is that inventory ties up cash that could pay down the loan; over-ordering for the season has a real cost.

Recommendations

Based on the June count, the shop should count high-volume parts weekly in rotation, keep the back room locked, require a second person to sign for deliveries and investigate any count difference over $200 the day it is found. Small parts that sell in volume, such as inner tubes, could move behind the counter. And a full count each quarter, rather than only at year-end, will catch problems while they are still small.

Conclusion

June's records show a healthy gross margin and turnover, but the count revealed a $1,900 gap. DeHoratius and Raman show such gaps are common, Gaur, Fisher and Raman help interpret turnover and Chen, Frank and Wu show why excess inventory costs more than it seems.

References

Chen, H., Frank, M. Z., & Wu, O. Q. (2005). What actually happened to the inventories of American companies between 1981 and 2000? Management Science, 51(7), 1015-1031. https://doi.org/10.1287/mnsc.1050.0368

DeHoratius, N., & Raman, A. (2008). Inventory record inaccuracy: An empirical analysis. Management Science, 54(4), 627-641. https://doi.org/10.1287/mnsc.1070.0789

Gaur, V., Fisher, M. L., & Raman, A. (2005). An econometric analysis of inventory turnover performance in retail services. Management Science, 51(2), 181-194. https://doi.org/10.1287/mnsc.1040.0298

MAT 200 Module 6 instructions, in plain terms

Module 6 in MAT 200 commonly covers merchandising operations, asking students to record purchases and sales of inventory and analyze gross profit. Use your course's Module 6 page; the shop and figures are invented. Explain perpetual and periodic inventory systems and when each suits a business. Record purchases, discounts, returns and sales, with the journal entries for each. Compute cost of goods sold and gross margin. Explain and record inventory shrinkage. Analyze inventory turnover. Recommend inventory controls, and explain whether taking purchase discounts pays. Cite sources in APA 7 form.

How this MAT 200 Module 6 example is built

In June, the shop bought $28,000 of bikes and parts on credit, returned $800 of damaged helmets, took a 2% discount for paying a $10,000 invoice within ten days and sold $36,000 of merchandise costing $21,600 according to its records. Its physical count at June 30 found $43,700 of inventory against $45,600 in the records. DeHoratius and Raman's Management Science article studied nearly 370,000 inventory records at a retailer and found most were wrong. Gaur, Fisher and Raman's Management Science article analyzed inventory turnover across U.S. retailers. Chen, Frank and Wu's Management Science article examined inventories of American companies from 1981 to 2000. The cost of goods sold table shows net purchases of $27,000 and cost of goods sold of $23,500 after the $1,900 shrinkage adjustment. Gross margin is $12,500, or 34.7% of sales. Annualized turnover is about 6.7 times.

Where the marks sit in the MAT 200 Module 6 rubric

Merchandising papers earn credit when entries for purchases, discounts, returns and sales are correct, and when the writer interprets gross margin and inventory rather than only computing them. This example records each type of transaction, explains shrinkage and adjusts for it and uses DeHoratius and Raman, Gaur, Fisher and Raman and Chen, Frank and Wu to put the shop's inventory in context. The cost of goods sold table is clear, and the recommendations address the causes of the gap. Comparing records with a physical count shows why perpetual systems still need counting. Working out the annual cost of a missed purchase discount turns a small entry into a management decision.

MAT 200 Module 6 help from the desk

Merchandising papers often forget to reduce inventory when goods are sold, or record purchase discounts incorrectly. Under a perpetual system, each sale has two entries: revenue and cost of goods sold. Another weakness is ignoring shrinkage; compare records to a physical count and adjust. Show the calculation of net purchases and cost of goods sold. Interpret gross margin and turnover, not only compute them. Recommend controls that address the likely causes of shortfalls, and show the main journal entries. Finally, keep units and periods consistent when computing turnover. Work out what a purchase discount is worth as an annual rate before deciding whether to take it.

Write yours, or have the desk draft it

This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.

More MAT 200 and Business Administration sample papers

MAT 200 Module 6 questions, answered

What does MAT 200 Module 6 usually ask for?

Aspen's MAT 200 commonly covers merchandising operations in this module, so recording inventory purchases and sales and analyzing gross profit is typical. Review your classroom prompt.

What is inventory shrinkage?

The difference between inventory shown in the records and inventory actually on hand, caused by theft, damage, errors or misplaced items.

How accurate are inventory records?

DeHoratius and Raman found that about 65% of inventory records at a large retailer did not match the actual quantity on hand.

Where can I find a free MAT 200 Module 6 sample paper?

The example above records a bike shop's merchandising transactions and explains an inventory shortfall.

What drives inventory turnover?

Gaur, Fisher and Raman found that retailers' turnover was related to gross margin, capital intensity and sales surprises.