SU Accounting Fund Purchasing an Inventory Transaction Effects Discussion

Your response should be 2-3 paragraphs and incorporate at least one outside reference. You will NOT be able to see others responses until you make the initial posting. You are then encouraged to engage in the discussion as frequently as possible. Use Citation!!!! Book title: Accounting Tools for Business Decisions with WileyPlus Edition: 7th Author(s): Kimmel ISBN: 9781119598381

Your response should be 2-3 paragraphs and incorporate at least one outside reference. You will NOT be able to see others responses until you make the initial posting. You are then encouraged to engage in the discussion as frequently as possible.

Nixon Wholesale Corp. uses the LIFO cost flow method. In the current year, profit at Nixon is running unusually high. The corporate tax rate is also high this year, but it is scheduled to decline significantly next year. In an effort to lower the current year’s net income and to take advantage of the changing income tax rate, the president of Nixon Wholesale instructs the plant accountant to recommend to the purchasing department a large purchase of inventory for delivery 3 days before the end of the year. The price of the inventory to be purchased has doubled during the year, and the purchase will represent a major portion of the ending inventory value.

What is the effect of this transaction on this year’s and next year’s income statement and income tax expense? Should the plant accountant order the inventory purchase to lower income? What are the ethical implications of this order?