Question: The Jenkins Corporation a merchandising company wants to include the
The Jenkins Corporation, a merchandising company, wants to include the cost of operating its ware-house in the cost of inventory. The company’s controller argues that the cost of the warehouse is a reasonable and necessary cost of getting the inventory ready for sale and, therefore, should be included in the cost of the inventory. What impact will this decision have on the firm’s income statement and balance sheet? Do you think the controller is justified in his actions? Why?
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