Nani is a merchandising company; it buys and sells unique vintage clothing to men and women. Although it owns and operates 20 small boutiques throughout the United States, it primarily sells merchandise on-line. In addition to its own merchandising activities, Nani also has franchisees; it earns revenues from its franchisees in the form of 1) franchise fees and 2) consulting fees for services it provides to its franchisees. Nani was established in 2015 in Chicago, Illinois, where it still maintains its headquarters. Its fiscal year-end is December 31. The company’s accounting policies and practices include the following: Revenue Recognition: Nani recognizes revenue when all of the following criteria have been met: a valid customer order with a determinable price has been received; title and risk of loss have transferred to the customer; there is no further significant obligation to assist in the resale of the product; and collectibility is reasonably assured. Products are shipped with FOB shipping point terms. Shipping and Handling Costs: Transportation costs included in cost of products sold relate to the costs incurred to ship products. Distribution costs are included in selling, distribution, and administrative (“SD&A”) expenses and relate to the warehousing costs incurred to store products. Trade Receivables: In the normal course of business, Nani extends credit to its franchisees. Trade receivables, less
