Exhibit 8-1

Lakeside Company
INTERCOMPANY MEMO
TO:

All Store Managers, All Assistant Store Managers, All Members of the
Inventory Department.

FROM:

Edward Thomas, Vice-President

SUBJECT:

Annual Physical Inventory

DATE:

December 2, 1991

We will count the inventory at all of the lakeside stores as well as

warehouse on Sunday, January 3, 1992. Each of the store managers will
responsible for the physical inventory at their store. The inventory department
count the merchandise here at the warehouse. You should plan to perform
following steps:

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PRELIMINARY
(1) During the week prior to the 3 rd, ship out all inventory that has been sod so that it will not be
accidentally counted.
(2) Isolate and label any inventory that does not belong to lakeside. These items will include
merchandise returned for repair as well as sold inventory that could not be shipped out at this
time.
(3) Isolate and label any damaged inventory or other items where marketability has been
impaired.
(4) Group Similar Inventory items. Counting will be easier and quicker if, for example, all radios
of a particular type are already together.
(5) Make certain that you have enough prenumbered inventory tags. These tags should be
picked up at the warehouse by Friday afternoon. You should have at least 200 tags. Verify
that the numbers are sequential and that no numbers are missing.
(6) Inform all employees who will be assisting in the count of their responsibilities. Give each of
these employees a copy of this memo and ask them to read it prior to the 3rd.

COUNTING PROCEDURES

(1) Have all employees arrive by 8:00 A.M. on Sunday, January 3. We normally assume that two
people can count a stores entire inventory in about 4 to 6 hours. Eight people will be needed
to count the warehouse inventory. You may ask more employees to assist but remember that
they must be paid overtime wage rates.
(2) A member of the auditing firm Abernethy and Chapman may be present to observe your
count. If an Auditor is on hand, this individual should be given full cooperation and allowed to
perform any procedures considered necessary.
(3) Divide the employees into two-member counting teams. Before the actual count begins,
review all instructions with each team.
(4) One member of each team should count the inventory while the other records the quantity,
the type of item, and the Cypress serial number on a prenumbered inventory tag. The tag
should then be attached at a prominent place on the inventory items. Tags must be used
sequentially.
(5) All tags should be completed in ink. If a change needs to be made to a tag, the original data
should marked out and the correction entered. The person making the alteration must initial
the change. To ensure that unauthorized changes are not mad, no erasures are permitted.
(6) If any tags have to be voided, write VOID across the face. These tags should be saved and
returned with the unused tags.
(7) Each team is responsible for counting all inventory within the assigned areas. Any items not
counted should be clearly labelled, giving the reasons for exclusion.
(8) When a team has counted and tagged all inventory, the person in charge of the count should
be informed (as well as the auditor if present).
(9) The in-charge employee will examine the area to ensure that all merchandise is tagged. The
auditor should be allowed to perform whichever tests are considered necessary. After both
the in-charge employee and the auditor have completed their review, the counting team will
return and remove the bottom portion of each tag.
(10)

The counting team sorts the tags into numerical order, making certain that all tags

are present. When all tags are located, the in-charge employee should bring them directly to
the company office and give them to me on Sunday afternoon.

(11)

If any problems arise, call me at the company office immediately.