Phil Barely has his own business. He recently heard that there are different methods of valuing inventory and that some methods result in a lower net income, which can mean lower taxes. He sees a wonderful opportunity to minimize inventory value and net income by changing his inventory costing method each year. Directions: In writing explain to Phil why he would be violating an accounting principle if he implemented his idea. (Hint: Don’t forget to include the basis of your discussion, the accounting principle).
Phil Barely has his own business. He recently heard that there are different methods of valuing inventory and that some methods result in a lower net income, which can mean lower taxes. He sees a wonderful opportunity to minimize inventory value and net income by changing his inventory costing method each year. Directions: In writing explain to Phil why he would be violating an accounting principle if he implemented his idea. (Hint: Don’t forget to include the basis of your discussion, the accounting principle).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Phil Barely has his own business. He recently heard that there are different methods of valuing inventory and that some methods result in a lower net income, which can mean lower taxes. He sees a wonderful opportunity to minimize inventory value and net income by changing his inventory costing method each year.
Directions:
In writing explain to Phil why he would be violating an accounting principle if he implemented his idea. (Hint: Don’t forget to include the basis of your discussion, the accounting principle).
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