A manager of mens clothing store receives a bonus based on the amount of gross profit earned
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Question:
A manager of mens 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. Explain the following:
- 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?
- To qualify for the year-end bonus, the manager should or should-not double count over two thousand dollars of ending inventory? Why?
- Is intentionally double counting ending inventory ethical? Why or why not?
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