Question

BTN 1.3 Assume that you are the managerial accountant at Infostore, a manufacturer of hard drives, CDs, ETHICS and DVDs. Its reporting year-end is December 31. The chief financ 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. ial officer is concerned about having CHALLENGE C1 C3 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?

Answer 1

1) Wrong disclosure for tax evasion is not acceptable. Hence excess inventory purchased should be recorded in CD Raw Material Inventory A/c & shouldn't be expensed off.

2) Tax evasion is illegal. Tell the chief financial officer that suggestions given by him are unethical & illegal and that you cannot perform such wrongful recording & If insisted you will report to other senior management.