You have been working at Best Buy Ltd. for the last year. Best Buy is a large Canada-wide electronics company, with its head office in Canada. Best Buy has been in business for over 10 years and is growing. The company has a reputation for having good-quality products with great customer service.

You are responsible for all financial accounting functions related to inventory costing. All inventory is located in Vancouver, and customer orders are handled out of the location.

You've never had the opportunity to go to Vancouver to see the warehouse. You think it's a bit strange that whenever you ask if you can fly out to see the warehouse, management says that it's not a good time. You still feel that since you are the main person responsible for costing the inventory, it's important for you to have a clear understanding of the process in Vancouver and the types of inventory in the warehouse.

You were recently invited to your friend's wedding, which happens to be in Vancouver. You feel that this would be a perfect opportunity to see the warehouse and put a name to the faces of the people you've been speaking with on the telephone for the last two years. You decide not to mention to anyone that you plan to visit the location. You think it will be a great surprise.

When you arrive in Vancouver, you ask for a tour of the warehouse. Alan , who is the supervisor of the warehouse, is happy to see you and offers to give you the tour. You are amazed at how large the warehouse is and the amount of inventory on the premises.

During the tour, you notice several areas of inventory in old boxes, in some cases very dirty and ripped boxes. You ask Alan about this inventory and he says that those boxes have been there for years, and he's not even sure what's in them anymore. "Whenever a customer returns an item or we find a box that is ripped, we just toss the inventory in the corner and pull from the new inventory, which looks much nicer to ship to the customers," he says.

You take a closer look at the boxes and items and you identify that they are expensive. You ask Alan for a listing of all the inventory that has been segregated and deemed not suitable for customers. "Clearly this inventory now looks old and out of date, and we should have attempted to return all of this to the manufacturer for a refund," Alan tells you. Some of the items are over two years

old, perhaps three. Your concern is that you have all this inventory that really cannot be sold to anyone, and the chances that the manufacturer will take it back are slim.

You identify that the total cost of the segregated inventory is over one million dollars.

You thank Alan for the tour and tell him that it was a pleasure meeting him. You will be in touch.

 

 

1. Identify and discuss any accounting-related and potential ethical issues.

 

2. Why is inventory considered a very important account that requires a great deal of consideration?

Answer rating: 100% (QA)

1 AccountingRelated and Potential Ethical Issues a Inventory Valuation One of the accountingrelated issues in this situation is the proper valuation of inventory The inventory that has been segregated ... View the full answer