Financial and Managerial Accounting

Business

Quiz 8 :
Inventories and the Cost of Goods Sold

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Quiz 8 :
Inventories and the Cost of Goods Sold

Compute the cost of goods sold for the month under FIFO Method: Under this method, the goods purchased first will be utilized first and the most recent purchases will be left in stock. Compute the cost of goods sold for the month as under: Summarize the given data: January 4 : Purchased 100 units @2.10 January 23 : Purchased 120 units @2.25 January 28 : Sold 50 units img Since, the FIFO method is used, the cost per unit of earlier purchases ($2.10) should be applied to determine cost of goods sold. Hence, the cost of goods sold is $105.

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(a) Ethical issues rose for L by F's disclosure: The following are the three related ethical issues. (1) The tax practices of L S are both unethical and illegal. If L is in a position of responsibility, she can't involve in such practices or allow them to continue. (2) L was not questioning about the basic integrity of her prospective employer F. though F is suggesting that the fraud continue after Amy comes "on board." (3) The issue of confidentiality. Both CPAs and CMAs should not disclose confidential information without the employer's permission. (b) The proposal made by F to understate of inventory in income tax would be unethical and illegal. (c) The following are the three alternative ethical courses of action that are open to L: (1) She should not associate herself with the company. Hence, she should decline the job. She should treat the F's disclosures as confidential information, if she chooses this course. (2) She should accept the position and take immediate steps to rectify the problem. (3) She would be sure that inventory was correctly stated in the next year's tax return. However, she should be sure that the returns already filed are not amended.