discussion_manipulation_profit - Discussion Ethics Case...

  • U.E.T Taxila
  • FINANCE 102
  • Notes
  • senicasosedu2016
  • 1
  • 0% (4) 0 out of 4 people found this document helpful

This preview shows page 1 out of 1 page.

Discussion: Ethics Case: Profit Manipulation In 2010 the Moncrieff Company purchased from Jim Lester the right to be the sole distributor in the western states of a product called Zelenex. In payment, Moncrief agreed to pay Lester 20% of the gross profit recognized from the sale of Zelenex in 2011. If Moncrief purchases the additional units at year end under a periodic LIFO inventory system, Moncrief reduces Jim Lester's payment by $40,000 ($210,000 – $170,000) and decreases gross profit by $200,000 ($1,050,000 – $850,000). The net effect on before-tax income is a decrease of $160,000 ($200,000 – $40,000). Since Moncrief does not intend to sell the units until 2014, the only logical reason for

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture