This is a \'post-first\' discussion forum. There are currently 12 threads in thi

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This is a 'post-first' discussion forum. There are currently 12 threads in this forum. Join the conversation by creating a thread! Enter Chapter 14 in the Subject Box This is a required activity. You must post before viewing other studenit's posts. Answer the lead question. Additionally, expand the discussion by posting two responses to your peers' posts Chapter 14 Lead Question Discussion Post accountant at Infostore, a manufacturer of hard drives, CDs, and DVDs. Its reporting year-end is December 31. The chief financial officer is concerned about Assume that you are the having enough cash to pay the expected income tax bill 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 and expense it 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? Which financial statement does this account show up on? 2) How should you respond to this request by the chief financial officer? 40322018 eatch

Explanation / Answer

Req 1. The purchase of CD shall be recorded in Inventory Account which shall be reflecting in the balance sheet. In other words, the ending inventory shall be increased with this purchases and resulting cost of goods sold shall be reduced with such level f inventory. This Ending Inventory is a part of current assets in the Balance sheet prepared at the end of period.

Req2: The Chief Financial Officer has asked to show the ending inventory as an expense of the current year in the head Supplies expense Account. This will reduce the income of the current year and resulting tax liability. However, as a responsible officer entrusted with some legal responsibility, we should not follow the instruction of CFO od understating the assets and incomes and overstatement of expense. This is against our ethical norms. Moreover, such practice may provide relief from tax liability in near-term and in long-term, it will have to be paid off. Moreover, the company assets (i.e. ending inventory) will be at risk as it is not been reflecting in the books.

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