Natalie Estrada found this troubling memo that had been left in the printer. The memo is...

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Natalie Estrada found this troubling memo that had been left in the printer. The memo is from her boss, Lynn Tan, an Executive Vice President at Buchanan Toys, to Francisco Rodrignez. Buchanan's controller. BUCHANAN TOYS INTERNAL MEMO Sept 15 To: Francisco Rodriguez. Controller Fm: Lyni Tan, Executive Vice Presidenut As you know, we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season. Meanwhile, we are building up our finished goods inventories so that we will be ready to slip next month. Unfortunately, we ace in a bind right now siice it looks like the net income for the qutarter ending on Sept 30 is going to be pretty awful. This may get un in trouble with the bank since they slways review the quarterly financial reports and ay call in our loan if they don't like what they see. Is there any posnibility that wE could change the classification of some of our period costs to product costs-soch as the rest ou the finished goods warehouse? Please let me know as soon as possible. The Presndent is pusling for results. Natalie didn't know what to do abont the memn. It wn't intended for her. tnst its contents were alarming. Required: know we didu't specifically talk abot the iue taised here, but we did ilins (in chapter one) peiod aid product costs and how they differ in the way thay affect the finncial statements. Use that knowledpe to sugeest anwers to the follewug twe questions a. Why has Lynn Tan suggested reclassifying some period costa as product costs? b. Why do you think Natalie fonnd the memo alarming? Natalie Estrada found this troubling memo that had been left in the printer. The memo is from her boss, Lynn Tan, an Executive Vice President at Buchanan Toys, to Francisco Rodrignez. Buchanan's controller. BUCHANAN TOYS INTERNAL MEMO Sept 15 To: Francisco Rodriguez. Controller Fm: Lyni Tan, Executive Vice Presidenut As you know, we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season. Meanwhile, we are building up our finished goods inventories so that we will be ready to slip next month. Unfortunately, we ace in a bind right now siice it looks like the net income for the qutarter ending on Sept 30 is going to be pretty awful. This may get un in trouble with the bank since they slways review the quarterly financial reports and ay call in our loan if they don't like what they see. Is there any posnibility that wE could change the classification of some of our period costs to product costs-soch as the rest ou the finished goods warehouse? Please let me know as soon as possible. The Presndent is pusling for results. Natalie didn't know what to do abont the memn. It wn't intended for her. tnst its contents were alarming. Required: know we didu't specifically talk abot the iue taised here, but we did ilins (in chapter one) peiod aid product costs and how they differ in the way thay affect the finncial statements. Use that knowledpe to sugeest anwers to the follewug twe questions a. Why has Lynn Tan suggested reclassifying some period costa as product costs? b. Why do you think Natalie fonnd the memo alarming?

Answer rating: 100% (QA)

a Period costs are charged to the income statement as expenses as and when they are incurred Whereas ... View the full answer