ThredUp Inc. is a startup online consignment and thrift store. Customers can buy like-new, carefully vetted brand-name clothing from ThredUp's online store at discounts of up to 90% off of the original retail prices.

Customers can also send in their unwanted clothing articles for ThredUp to resell. ThredUp's professional buyers go through the articles of clothing sent in and assess the salability of those items. ThredUp only accepts certain brand names of clothing, including brands like J. Crew, Gucci, Gap, and Nike. Items must also be in new or like-new condition. When ThredUp accepts an article of clothing to list on its online store, the item is accepted on consignment and the payout to the original owner will occur once the item sells and a 14-day return window has passed. A consigned item can be reclaimed by the owner after it is listed on ThredUp's website. If the item has not sold and has not been reclaimed by the original owner within a specified length of time, the item becomes the property of ThredUp.

If clothing articles sent in by potential sellers do not measure up to ThredUp's standards, the items are returned to the original owner if they have indicated that they want to have the items returned. Otherwise, ThredUp will either sell the unaccepted items to third party sellers or pass them onto textile recyclers to be upcycled.

In addition to consignment goods that are sent in by the original owners for resale, ThredUp does purchase some items for its inventory. ThredUp's inventory increased from $3.5 million to $9.8 million during its fiscal year ending December 31, 2021 (link). It uses the specific identification method for costing its inventory.

Required:

You are an accounting manager for ThredUp.

You need to compose a Business Memo to the Board of Directors who are questioning the reporting of inventory information.

Your memo must include the following information (see the rubric for specific grading instructions):

Note: You are not simply responding to the questions, but weaving the information from the discussion posts into a memo that speaks to the role listed above.

1. Discuss how consignment inventory is recorded and reported on both the consignor's (the owner) and the consignee's (the agent selling the goods) accounting records.

2. Discuss why the proper classification of inventory and cost of sales amounts is important? Include a discussion about where inventory and costs of sales are shown on the financial statements. Explain your reasoning.