Determine whether each of the following actions in buying. selling. and accounting for inventories is ethical or unethical. Give your reason for each answer.0 (Click the icon to view the actions.) 1. In applying the lower-of—cost—and-net—realizable-value rule to inventories, Terre Haute Industries recorded an excessively low net realizable value for its ending inventory. This allowed the company to pay less income tax for the year. This action is V because V 2. Laminated Photo Film purchased lots of inventory shortly before year-end to increase the weighted-average cost of goods sold and decrease reported income for the year. This action is V because V 3. Madison Inc. delayed the purchase of inventory until after December 31, 2017, to keep 2017’s cost of goods sold from growing too large. The delay in purchasing inventory helped net income in 2017 to reach the level of proﬁt demanded by thecompany’s investors. This action is |<l because : 4. Dover Sales Company deliberately overstated ending inventory in order to report higher proﬁts (net income), This action is 7 because V 5. Roberto Corporation deliberately overstated purchases to produce a high ﬁgure for cost of goods sold (low amount of net income). The real reason was to decrease the company’s income tax payments to the government. This action is V because 7
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