An accounting intern for a local CPA firm was reviewing the financial statements of a client in the electronics industry. The intern noticed that the client used the FIFO method of determining ending inventory and cost of goods sold. When she asked a colleague why the firm used FIFO instead of LIFO, she was told that the client used FIFO to minimize its income tax liability. This response puzzled the intern because she thought that LIFO would minimize income tax liability. Required: What would you tell the intern to resolve the confusion?
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- You have just been hired as a consultant to Gilbert Industries, a newly formed company. The company president, Mindy Grayson, is seeking your advice as to the appropriate inventory method the company should use to value its inventory and cost of goods sold. Ms. Grayson has narrowed the choice to LIFO and FIFO. She has heard that LIFO might be better for tax purposes, but FIFO has certain advantages for financial reporting to investors and creditors. You have been told that the company will be profitable in the first year and for the foreseeable future.Identify (list) the issues that the company president, Mindy Grayson, should consider in choosing between the LIFO and FIFO methods.You have just been hired as a consultant to Gilbert Industries, a newly formed company. The company president, Mindy Grayson, is seeking your advice as to the appropriate inventory method Gilbert should use to value its inventory and cost of goods sold. Ms. Grayson has narrowed the choice to LIFO and FIFO. She has heard that LIFO might be better for tax purposes, but FIFO has certain advantages for financial reporting to investors and creditors. You have been told that the company will be profitable in its first year and for the foreseeable future. Required: Prepare a report for the president describing the factors that should be considered by Gilbert in choosing between LIFO and FIFO.Justine is an accountant in the accounting department of Modern Industries, Inc. Justine has just discovered evidence that some of the corporation's marketing managers have been wrongfully inflating their expense reports in order to obtain higher reimbursements from the firm. According to the understanding and acceptance of the basic principles and concepts of ethical conduct, what should Justine do upon discovering this evidence? a. Notify the marketing managers involved. b. Notify the controller. c. Ignore the evidence because she is not part of the Marketing Department. d. Notify the president of the corporation.
- You have just been hired as a consultant to Tangier Industries, a newly formed company. The company president, John Meeks, is seeking your advice as to the appropriate inventory method Tangier should use to value its inventory and cost of goods sold. Mr. Meeks has narrowed the choice to LIFO and FIFO. He has heard that LIFO might be better for tax purposes, but FIFO has certain advantages for financial reporting to investors and creditors. You have been told that the company will be profitable in its first year and for the foreseeable future. Required: Prepare a report for the president describing the factors that should be considered by Tangier in choosing between LIFO and FIFO.Peter Pan is a young accountant who came from a poor family. He was recently hired by a big company called PetraPak. When it was time to audit the accounting books of the company, Peter was instructed by his boss to manipulate the numbers in order to reduce the taxes expense the company will have to pay the Bureau of Internal Revenue. The company official said that if he would not heed the command, he would be terminated. The employment condition that time was really tight and the chance of finding another job is very minimal. Question: If you were Peter Pan, will you obey your boss? Why? Or why not?Suppose that a company called Futuristics, Inc hires you to work in Supply Cha Management. Your new manager sets up a meeting to discuss the Surfers, Inc. account. The meeting opens with the manager stating, "I just reviewed the financial report on Surfers, Inc. It really doesn't cost much to serve them, does i Which of the following would be an appropriate response to the manager's statement? Traditional accounting methods are perfect to help us make decisions about serving the Surfers, Inc. account Activity-based costing would be better to report the Surfers, Inc. results to the financial community Traditional cost accounting gives us a good measure for comparing by customer Activity-based costing could better show us how much it really costs to serve Surfers, Inc. Activity-based costing takes depreciation into account to enable us to know when to replace machinery
- A customer has filed a suit against a trader who has supplied poor quality goods to him. It is known that the court judgment will be in favour of the customer and the trader will be required to pay the damages. However, the amount of legal damages is not known with certainity. The accounting year has already been ended and the books are now finalised to ascertain true profit or loss. The accountant of the trader has advised him not to consider the expected loss on account of payment of legal damages because the amount is not certain and the final judgment of the court is not yet out. Do you think the accountant is right in his approach.Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow’s brother Roger, who is a partner in a large firm of chartered accountants. The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses. Snow has only recently joined Taxation Matters and he is concerned about the firm’s pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of…Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow's brother Roger, who is a partner in a large firm of chartered accountants. The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses. Snow has only recently joined Taxation Matters and he is concerned about the firm's pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of…
- Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow’s brother Roger, who is a partner in a large firm of chartered accountants.The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses.Snow has only recently joined Taxation Matters and he is concerned about the firm’s pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of…Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow's brother Roger, who is a partner in a large firm of chartered accountants. The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses. Snow has only recently joined Taxation Matters and he is concerned about the firm's pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of…Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparationof income tax returns. The firm offers two basic products: the preparation of income tax returnsfor wage and salary earners, and the preparation of income tax returns for small businesses.Any clients requiring more complex services are referred to Snow’s brother Roger, who is apartner in a large firm of chartered accountants.The processing of wage and salary tax returns is quite straightforward, and the firm uses asoftware package to process data and print the return. A software package is also used toprepare returns for small businesses, although more information is required, particularly aboutbusiness expenses.Snow has only recently joined Taxation Matters and he is concerned about the firm’s pricingpolicy, which sets flat fees of $60 per return for wage and salary clients and $300 for smallbusinesses. He decides to use activity-based costing to estimate the costs of providing each ofthese…