A4 - AC101- Accounting Principles II BTN 18-3 Assume that...

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AC101- Accounting Principles II BTN 18-3 Assume that you are the managerial accountant at Infostore, a manufacturer of hard drives, CD’s, and diskettes. Its reporting year-end is December 31. The chief financial officer is concerned about having enough cash to pay the expected income tax bill because of poor cash flow management. On November 15, the purchasing department purchased excess inventory of new CD raw materials in anticipation of rapid growth of this product beginning in January. To decrease the company’s tax liability, the chief financial officer tells you to record the purchase of this inventory as part of supplies expense in the current year; this would decrease the company’s tax liability by increasing expenses. 1. In which account should the purchase of CD raw materials be recorded? In the Raw Materials Inventory account 2. How should you respond to this request by the chief financial officer? Explain to the chief officer the fact that by recording inventory as a supply expense, you are not carrying out your responsibilities as an accountant to provide accurate information to the company. By knowingly recording inventory as an expense, you are breaking the law and this puts you in a bad position. Not only could you lose your job and credibility as an accountant, but the company could also get into a lot of trouble for doing this. If the chief officer continues to pursue this idea, you can take this issue to possibly the
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This note was uploaded on 10/12/2008 for the course AC 102 taught by Professor Min during the Spring '08 term at Mt. Aloysius.

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A4 - AC101- Accounting Principles II BTN 18-3 Assume that...

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