Requited 1&2
1. How dors Golf Mart's use of FIFO ~
2. Is the action by Golf Mart's owner ethical? explain.
1. A shift to FIFO from weighted average costing will lead to the cost being accounted at the earlier prices which were lesser. This will result in the cost of goods sold having a value lower than the weighted average cost and subsequently show higher gross profit and net profit. Also, in FIFO the ending inventory reflects the most recent prices of inventory; thereby inflating the figures. A higher inventory value will increase the current ratio due to the numerator of current assets being overvalued.
2. It is certainly unethical to show inaccurate figures in the financials just to obtain a bank loan. This may get him the bank loan eventually but the payments will be a problem to due liquidity issues due to incorrect accounting. Also, the same will discovered during audit sooner or later and will put the owner in to trouble due to inconsistent financial reporting. The owner must understand that the flexibility of choosing inventory methods must be only applied if the method will result in better presentation of financials or as required by law.
Requited 1&2 1. How dors Golf Mart's use of FIFO ~ 2. Is the action by...
This problem is appeared already in Financial Accounting
book
But, It is slightly different from the problem in the book (Ex.
Not LIFO But Weighted average cost)
So, I can't refer to answer in the book part.
BTN 6-3 BTN 6-3 Golf Mart is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased...
Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at the end of its second year of operation and is struggling. A major problem is that its cost of inventory has continually increased in the past two years. In the first year of operations, the store assigned inventory costs using LIFO. A loan agreement the store has with its bank, its prime source of financing, requires the store to maintain a certain profit...
1. is Golf Challenge's change from LIFO TO FIFO ethics ?
Consider whether such a change would be misleading to
investors.
2. under what type of circumstance should a company be
permitted to change inventory costing methods?
Beyond the Numbers A10 BTN 5.1 Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at ETHICS the end of its second year of operation and is struggling. A major problem is that its cost of...
John's sports Jerseys is a retail store that sells vintage sports apparel and accessories. The store is in its third year of operations and is struggling financially. Part of the problem is that the cost of inventory has increased dramatically over the past two years. The store assigns inventory costs using LIFO. A loan agreement with the bank requires the store to maintain a certain profit margin. John is reviewing the current year financial statements and sees that results are...
Use the following informaation to anrer Exeraises E&-16 throngh E6-18 Golf Unlimited carries an inventory of putterrs and other golf clubs. The sales pce of cach putrer is $119. Company records indicate the following for a particular o E6-19 Ce pr Golf Unlimited's putters: Ass foll Unit Cost Quantity Item Date $ 53 24 Balance Nov. 1 20 Sale 6 70 30 Purchase 8 30 Sale 17 2 Sale 30 goods E6-16 Measuring and journalizing merchandise inventory and cost of...
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