(Answered) 1 lower-of-cost-or-market the market value of lake

Accounting

1. Lower-of-Cost-or-Market The market value of Lake Corporation's inventory has declined below its cost. Sheryl Conan, the controller, wants to use the allowance method to write down inventory because it more clearly discloses the decline in market value and does not distort the cost of goods sold. Her supervisor, financial vice president Dick Wright, prefers the direct method to write down inventory because it does not call attention to the decline in market value. Answer the following questions.

(a) What, if any, is the ethical issue involved?

(b) Is any stakeholder harmed if Dick Wright's preference is used?

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