Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Webber Electronic sells game consoles. The company has been extremely successful in recent years, recording an increase in earnings each of the past six quarters.
Webber Electronic sells game consoles. The company has been extremely successful in recent years, recording an increase in earnings each of the past six quarters. At the end of the current year, Jay Shulz, the company's staff accountant, calculated the ending inventory for the game consoles and was surprised to find that the quantity of the Hayden X537 model had not changed during the quarter. Jay confirmed his calculation with the inventory control manager, who indicated that sales of the Hayden X537 had stopped when the Hayden 637X game console was released early in the quarter. Jay researched the issue further and found that the Hayden 637x game console has the same applications as the Hayden X537, but has more processing power and a lower cost than the X537. Jay emailed this information to Tina Vereen, the chief financial officer, and recommended that the company apply the lower-of-cost-or-market method to the Hayden X537 game consoles in inventory. Later that day, Tina emailed Jay back instructing him not to apply lower-of-cost-or-market to the X537 inventory because "the company is under considerable pressure to maintain its track record of earnings growth, and a lower-of- cost-or-market adjustment would result in "a significant decline in earnings this quarter." Reluctantly, Jay followed Tina's instructions. In your response address the following items: Who could be harmed by this decision? Who benefits from this decision? Are there any ethical considerations with the actions of Jay and/or Tina
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started