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Question - Grace Company Ltd uses the weighted average-cost method for inventory costing under periodic system. The company is having a very good year. In an effort to reduce income in the current year, the accountant took the unusual step of recommending to the purchasing department to make a large purchase of inventory at year-end. The price of the item to be purchased has nearly tripled during the year, and the item represents a major portion of inventory value.

(a) If the accountant recommends the purchase, what are the consequences?

(b) If Grace Company was using the FIFO method of inventory costing, what are the consequences?

Reference no: EM132759984

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