Sizemo Elektroniks sells semiconductors that are used in games and small toys. The company has been extremely successful in recent years, recording an increase in earnings each of the past six quarters. At the end of the current quarter, Jay Shulz, the company’s staff accountant, calcu- lated the ending inventory for the semiconductors and was surprised to find that the quantity of the Hayden X537 model had not changed during the quarter. Jay confirmed his calculation with the inventory control manager, who indicated that sales of the Hayden 537X had stopped when the Hayden 637X semiconductor was released early in the quarter. Jay researched the issue further and found that the Hayden 637X semiconductor has the same applications as the Hayden 537X, but has more computing power and a lower cost than the 537X. Jay emailed this information to Tina Vereen, the chief financial officer, and recommended that the company apply the lower-of-cost-or-market method to the Hayden 537X semiconductors in inventory. Later that day, Tina emailed Jay back instructing him not to apply the lower-of-cost-or-market method to the 537X inventory because “the company is under considerable pressure to main- tain its track record of earnings growth, and a lower-of-cost-or-market adjustment would result in a significant decline in earnings this quarter.” Reluctantly, Jay followed Tina’s instructions. Instructions: Answer each question below in a way where you use at least 200 words to answer all three questions ( NOT 200 words per question). After doing this, please respond to one of your peer's responses by using at least 100 words in your response. Evaluate the decision not to apply the lower-of-cost-or-market method in the current quarter. 1. Who benefits from this decision? 2. Who is harmed by this decision? 3. Are Jay and Tina acting in an ethical manner? Explain.
Sizemo Elektroniks sells semiconductors that are used in games and small toys. The company has been extremely successful in recent years, recording an increase in earnings each of the past six quarters. At the end of the current quarter, Jay Shulz, the company’s staff accountant, calcu- lated the ending inventory for the semiconductors and was surprised to find that the quantity of the Hayden X537 model had not changed during the quarter. Jay confirmed his calculation with the inventory control manager, who indicated that sales of the Hayden 537X had stopped when the Hayden 637X semiconductor was released early in the quarter. Jay researched the issue further and found that the Hayden 637X semiconductor has the same applications as the Hayden 537X, but has more computing power and a lower cost than the 537X. Jay emailed this information to Tina Vereen, the chief financial officer, and recommended that the company apply the lower-of-cost-or-market method to the Hayden 537X semiconductors in inventory. Later that day, Tina emailed Jay back instructing him not to apply the lower-of-cost-or-market method to the 537X inventory because “the company is under considerable pressure to main- tain its track record of earnings growth, and a lower-of-cost-or-market adjustment would result in a significant decline in earnings this quarter.” Reluctantly, Jay followed Tina’s instructions. Instructions: Answer each question below in a way where you use at least 200 words to answer all three questions ( NOT 200 words per question). After doing this, please respond to one of your peer's responses by using at least 100 words in your response. Evaluate the decision not to apply the lower-of-cost-or-market method in the current quarter. 1. Who benefits from this decision? 2. Who is harmed by this decision? 3. Are Jay and Tina acting in an ethical manner? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Sizemo Elektroniks sells semiconductors that are used in games and small toys. The company has been extremely successful in recent years, recording an increase in earnings each of the past six quarters. At the end of the current quarter, Jay Shulz, the company’s staff accountant, calcu- lated the ending inventory for the semiconductors and was surprised to find that the quantity of the Hayden X537 model had not changed during the quarter. Jay confirmed his calculation with the inventory control manager, who indicated that sales of the Hayden 537X had stopped when the Hayden 637X semiconductor was released early in the quarter. Jay researched the issue further and found that the Hayden 637X semiconductor has the same applications as the Hayden 537X, but has more computing power and a lower cost than the 537X. Jay emailed this information to Tina Vereen, the chief financial officer, and recommended that the company apply the lower-of-cost-or-market method to the Hayden 537X semiconductors in inventory. Later that day, Tina emailed Jay back instructing him not to apply the lower-of-cost-or-market method to the 537X inventory because “the company is under considerable pressure to main- tain its track record of earnings growth, and a lower-of-cost-or-market adjustment would result in a significant decline in earnings this quarter.” Reluctantly, Jay followed Tina’s instructions.
Instructions:
Answer each question below in a way where you use at least 200 words to answer all three questions ( NOT 200 words per question). After doing this, please respond to one of your peer's responses by using at least 100 words in your response.
Evaluate the decision not to apply the lower-of-cost-or-market method in the current quarter.
1. Who benefits from this decision?
2. Who is harmed by this decision?
3. Are Jay and Tina acting in an ethical manner? Explain.
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