(LIFO Choices)

Wilkens Company uses the LIFO method for inventory costing. In an effort to lower net income, company president Mike Wilkens tells the plant accountant to take the unusual step of recommending to the purchasing department a large purchase of inventory at year-end. The price of the item to be purchased has nearly doubled during the year, and the item represents a major portion of inventory value.

Instructions

Answer the following questions.

(a)

Identify the major stakeholders. If the plant accountant recommends the purchase, what are the consequences?

(b)

If Wilkens Company were using the FIFO method of inventory costing, would Mike Wilkens give the same order? Why or why not?