Determine whether each of the actions below in buying, selling, and accounting for inventories is ethical or unethical. Give your reason for each answer.

1. Frank’s Tea Company knowingly overstated purchases to produce a high figure for cost of goods sold (and thus a low amount of net income). The real reason was to decrease the company’s income tax payments to the government.

2. During a period of rising prices, Plentea delayed the purchase of inventory until after December 31, 2023, in order to keep 2023’s moving-weighted-average cost of goods sold from growing too large. The delay in purchasing inventory helped net income of 2023 to reach the level of profit demanded by the company’s investors.

3. In applying the lower-of-cost-and-net-realizable-value rule to inventories, Sam’s Cookie Emporium recorded an excessively low realizable value for ending inventory. This allowed the company to pay no income tax for the year.

4. Hawk Distributors purchased a lot of inventory shortly before year end. The extra inventory that was purchased at a lower price decreased the moving-weightedaverage cost of goods sold and increased reported income for the year to reach the level of profit demanded by the company’s investors.

5. Lacombe Motorbike Sales deliberately overstated ending inventory in order to report higher profits (net income).