Assume that you are the managerial 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 having enough cash to pay the expected income tax bill because of poor cash flow management. On November 15, the purchasing department purchased excess inventory of CD raw materials in anticipation 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. Required 1. In which account should the purchase of CD raw materials be recorded? 2. How should you respond to this request by the chief financial officer?
Assume that you are the
CDs, and DVDs. Its reporting year-end is December 31. The chief financial officer is concerned
about having enough cash to pay the expected income tax bill because of poor
On November 15, the purchasing department purchased excess inventory of CD raw materials
in anticipation 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.
Required
1. In which account should the purchase of CD raw materials be recorded?
2. How should you respond to this request by the chief financial officer?
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