ACC305_Week4_Assignment

ACC305_Week4_Assignment - earnings and also deceiving...

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Week 4 Assignment Ethics Case 8-6 1. Gross profit without additional purchase: Sales (35,000 × $60) $2,100,000 Cost of goods sold (35,000 × $30) 1,050,000 Gross profit $1,050,000 Jim Lester receives ($1,050,000 × 20%) $210,000 Gross profit with additional purchase: Sales (35,000 × $60) $2,100,000 Cost of goods sold 20,000 × $40 $800,000 15,000 × $30 450,000 1,250,000 Gross profit $850,000 Jim Lester receives ($850,000 × 20%) $170,000
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2. Moncrief does face an ethical dilemma in this situation. There isn’t any reason for them to purchase the additional inventory before the year end, except in order to manipulate their gross profit. Some companies do this in order to pay less income tax, but this is an unethical practice. By participating in profit manipulation the company would be cheating Jim Lester out of his
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Unformatted text preview: earnings and also deceiving investors and tax collecting agencies. Real World Case 8-8 a) Whole Foods Market, Inc. uses the LIFO method to value 93.6% of its inventory and FIFO to value the remaining inventory. b) COGS (FIFO) = COGS (LIFO) – (LIFO reserve at the end of the period - LIFO reserve at the beginning of the period) COGS (FIFO) = 5,277,310 – (27,100,000 – 32,700,000) COGS (FIFO) = 5,277,310 – ( ¯5,600,000) COGS (FIFO) = $10,877,310 c) = = Inventory Turnover Cost of salesAverage inventory , , ( , + , ÷ )= . 5 277 310 310 602 327 452 2 16 54 d) e) Source: http://sec.gov/Archives/edgar/data/865436/000110465909067266/a09-34257_110k.htm#Item8_FinancialStatementsAndSuppl_105920 f)...
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This note was uploaded on 08/14/2011 for the course ACC 305 taught by Professor B.forde during the Spring '11 term at Ashford University.

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ACC305_Week4_Assignment - earnings and also deceiving...

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