Problem 6 Natalie Estrada Found This Troubling Memo That Had Been Left In The Printer The Memo Is From Her Boss Lynn 1 (44.1 KiB) Viewed 31 times
Problem 6 Natalie Estrada Found This Troubling Memo That Had Been Left In The Printer The Memo Is From Her Boss Lynn 2 (7.61 KiB) Viewed 31 times
Problem 6: 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 Rodriguez, Buchanan's controller. BUCHANAN TOYS INTERNAL MEMO Sept 15 To: Francisco Rodriguez, Controller Fm: Lynil Tan, Executive Vice President 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 ship next month. Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending on Sept 30 is going to be pretty awful. This may get us in trouble with the bank since they always review the quarterly financial reports and may call in our loan if they don't like what they see. Is there any possibility that we could change the classification of some of our period costs to product costs-such as the rent on the finished goods warehouse? Please let me know as soon as possible. The President is pushing for results. Natalie didn't know what to do about the memo. It wasn't intended for her, but its contents were alarming Required: I know we didn't specifically talk about the issue raised here, but we did discuss (in chapter one) period and product costs and how they differ in the way they affect the financial statements. Use that knowledge to suggest answers to the following two questions:
a. Why has Lynn Tan suggested reclassifying some period costs as product costs? b. Why do you think Natalie found the memo alarming?
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