Instructions a what is the effect of this transaction

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Instructions (a) What is the effect of this transaction on this year’s and next year’s income statement and in- come tax expense? Why? (b) If B. J. Ortiz Wholesale had been using the FIFO method of inventory costing, would the president give the same directive? (c) Should the plant accountant order the inventory purchase to lower income? What are the ethical implications of this order? ”All About You” Activity BYP6-7 Some of the largest business frauds ever perpetrated have involved the misstatement of inventory. Two classics were at Leslie Fay Cos , and McKesson Corporation . PDF Watermark Remover DEMO : Purchase from to remove the watermark
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298 Chapter 6 Inventories Remember to go back to the Navigator box on the chapter-opening page and check off your completed work. a19 Instructions There is considerable information regarding inventory frauds available on the Internet. Search for information about one of the two cases mentioned above, or inventory fraud at any other company, and prepare a short explanation of the nature of the inventory fraud. Answers to Insight and Accounting Across the Organization Questions p. 251 How Wal-Mart Tracks Inventory Q: Why is inventory control important to managers such as those at Wal-Mart and Best Buy? A: In the very competitive environment of discount retailing, where Wal-Mart is the major player, small differences in price matter to the customer.Wal-Mart sells a high volume of inventory at a low gross profit rate. When operating in a high-volume, low-margin environment, small cost savings can mean the difference between being profitable or going out of business. The same holds true for Best Buy. p. 262 Is LIFO Fair? Q: What are the arguments for and against the use of LIFO? A: Proponents of LIFO argue that it is conceptually superior because it matches the most recent cost with the most recent selling price.Critics contend that it artificially understates the company’s net income and consequently reduces tax payments. Also, because most foreign companies are not allowed to use LIFO, its use by U.S. companies reduces the ability of investors to compare results across companies. Authors’ Comments on All About You : Employee Theft—An Inside Job (p. 268) Opinions regarding video technology differ greatly. One chief operating officer of a pub and restaurant chain says his company considers them “Big Brother-ish and demeaning.” However, others feel that they are sometimes the only effective option.When properly implemented, theft- reduction procedures don’t need to offend employees or customers. Wal-Mart has long em- ployed senior citizens as greeters at its stores. Many people don’t realize that these “greeters” are actually part of Wal-Mart’s anti-shoplifting efforts.
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