Ethics Case Best Inc. uses a periodic inventory system and LIFO to value its ending inventory for income tax and external reporting purposes. Near the end of the current year, the following records and estimates are available for its single inventory item. wollt arb Beginning inventory (LIFO basis) Base inventory layer (normal minimum level).. Incremental inventory layer Purchases (actual) . . . . Sales* (at $100 per unit). . . . . Expenses* (excluding income taxes) Units 8,000 5,000 60,000 65,000 Unit Cost $40 50 70 $1,400,000 AD&J Analy Inven Using Issue Conc *Including estimates for remainder of the year. On December 27, the company has an opportunity to purchase no fewer than 30,000 units of its usual inventory item at $60 (a special price) with 10-day credit terms. Delivery is immediate, and the offer will expire January 3 of the following year. The question has been posed whether the purchase (and delivery) should be consummated this year or next year; management has tentatively decided to make the purchase this year. Required a. What purchase year do we recommend? Support the recommendation with reasons along with pro forma (as if) income statement and balance sheet data. Assume that 50,000 shares of common stock are outstanding and that the tax rate is 30%. b. Explain and illustrate why EPS would be changed if the purchase is made this year. c. Would we suspect the shifting of profit among periods in this situation if Best Inc. elected to make the pur- chase this year? Does this create an ethical issue? Explain. import furniture. Their initial partnership

Best Inc. uses a periodic inventory system and LIFO to value its ending inventory for income tax and external reporting purposes. Near the end of the current year, the following records and estimates are available for its single inventory item. On December 27 , the company has an opportunity to purchase no fewer than 30,000 units of its usual inventory item at $60 (a special price) with 10-day credit terms. Delivery is immediate, and the offer will expire January 3 of the following year. The question has been posed whether the purchase (and delivery) should be consummated this year or next year; management has tentatively decided to make the purchase this year. Required a. What purchase year do we recommend? Support the recommendation with reasons along with pro forma (as if income statement and balance sheet data. Assume that 50,000 shares of common stock are outstanding and that the tax rate is 30%. b. Explain and illustrate why EPS would be changed if the purchase is made this year. c. Would we suspect the shifting of profit among periods in this situation if Best Inc. elected to make the purchase this year? Does this create an ethical issue? Explain