Grace Company Ltd uses the weighted average-cost method for inventory costing under periodic system. The company...

 

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Grace Company Ltd uses the weighted average-cost method for inventory costing under periodic system. The company is having a very good year. In an effort to reduce income in the current year, the accountant took the unusual step of recommending to the purchasing department to make a large purchase of inventory at year-end. The price of the item to be purchased has nearly tripled during the year, and the item represents a major portion of inventory value. Required: In your own words; answer the followings: (a) If the accountant recommends the purchase, what are the consequences? (b) If Grace Company was using the FIFO method of inventory costing, what are the consequences? (Kieso 8-39) Kieso, Donald E., Jerry Weygandt, Terry Warfield. Intermediate Accounting: IFRS Edition, 4th Edition. Wiley, 06/2020. Grace Company Ltd uses the weighted average-cost method for inventory costing under periodic system. The company is having a very good year. In an effort to reduce income in the current year, the accountant took the unusual step of recommending to the purchasing department to make a large purchase of inventory at year-end. The price of the item to be purchased has nearly tripled during the year, and the item represents a major portion of inventory value. Required: In your own words; answer the followings: (a) If the accountant recommends the purchase, what are the consequences? (b) If Grace Company was using the FIFO method of inventory costing, what are the consequences? (Kieso 8-39) Kieso, Donald E., Jerry Weygandt, Terry Warfield. Intermediate Accounting: IFRS Edition, 4th Edition. Wiley, 06/2020.

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In the given case company is having a good year from financial point of view However to make sure fi... View the full answer