Question: Accounting for Managers (300-400 words please)
M6D2: Ethics and Financials: Inventory
A manager of men's clothing store receives a bonus based on the amount of gross profit earned by the department. This year the manager is only two thousand dollars short from qualifying for a sizable year-end bonus. The manager is in a position to have a portion of the inventory counted twice in the year-end physical inventory count. Cost of goods sold is adjusted for any changes to year-end inventory.
Discuss three or more of the following questions:
1. On the balance sheet, double counting a portion of ending inventory will result in what impact on ending inventory, total assets, cost of goods sold, gross profit?
2. To qualify for the year-end bonus, the manager should or should-not double count over two thousand dollars of ending inventory? Why?
3. Is intentionally double counting ending inventory ethical? Why or why not?
4. Is intentionally double counting ending inventory illegal? Why or why not?
5. List some possible consequences if upper management detects double counting of ending inventory.
6. Discussion some ways the double counting of inventory could be detected by management.