Discussion 5

Assume that you are the managerial accountant at InfoStore, a manufacturer of hard drives, CDs, and DVDs. Its reporting year-end is December 31. The chief financial officer is concerned about having enough cash to pay the expected income tax bill because of poor cash flow management. On November 15, the purchasing department purchased excess inventory of CD raw materials in anticipation of rapid growth of this product beginning in January of the next year. To decrease the company’s tax liability, the chief financial officer tells you to record the purchase of this inventory as part of supplies and expense it in the current year as this would decrease the company’s tax liability by increasing expenses.

Discuss the account to which the CDs should be recorded and identify the materials in terms of cost. How should you report to this request by the chief financial officer? Are there any ethical reporting aspects to consider?