Accounting Unit 3 Discussion
The line separates the 2 different discussions and each one needs to be over a hundred words. No title page or APA needed. I will need citations, and references.
You have been asked by the financial vice president (VP) to develop a short presentation on the lowerâ€ofâ€costâ€orâ€market method for inventory purposes. The financial VP needs to explain this method to the president because it appears that a portion of the company’s inventory has declined in value.
The financial VP asks you to answer the following questions.
- What is the purpose of the lowerâ€ofâ€costâ€orâ€market method?
- What is meant by â€œmarketâ€? (Hint: Discuss the ceiling and floor constraints.)
Tones Company purchased a warehouse in a downtown district where land values are rapidly increasing. Gerald Carter, controller, and Wilma Ankara, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Noting that depreciation can be taken only on the building, Carter favors placing a very high proportion of the cost on the warehouse itself, thus reducing taxable income and income taxes. Ankara, his supervisor, argues that the allocation should recognize the increasing value of the land, regardless of the depreciation potential of the warehouse. Besides, she says, net income is negatively impacted by additional depreciation and will cause the company’s stock price to go down.
Answer the following questions.
- What stakeholder interests are in conflict?
- What ethical issues does Carter face?
- How should these costs be allocated?