Problem - Daniel Dobbins Distillery Inc.
Please double space you answers and submit it to me through email or Blackboard no later than 5pm on Monday, February 6, 2017. I suspect your papers will be approximately 3 pages long but use as few or as many pages as you need to effectively and efficiently answer the questions. Please submit your spreadsheet with the assignment.
This can be a challenging case for students lacking an accounting background. If you become overwhelmed with the case, send me an email and I can guide you in the right direction or we can arrange to meet and review the case.
Questions
1. Please give a brief summary of the issue facing management in this case.
2. In your opinion, what costs should be included in Dobbin's inventory and why?
3. Assuming Dobbins decided to charge the cost of wooden aging barrels (but not other warehousing and aging costs) to inventory, what 1988 income statement items would change? What asset amounts on the balance sheet would change and what would the new amount(s) be? Assume that this change was made five years ago - i.e. this was the policy for all prior years. You do not need to list our every item that will change - most of this question will be answered with your work on the spreadsheet.
4. Assuming Dobbins decided to charge the cost of wooden aging barrels and warehouse labor costs (but not other warehousing and aging costs) to inventory, what 1988 income statement items would change? What asset amounts on the balance sheet would change and what would the new amount(s) be? Assume that this change was made five years ago - i.e. this was the policy for all prior years. You do not need to list our every item that will change - most of this question will be answered with your work on the spreadsheet.
5. What overall recommendations would you make to Dobbins management about its reporting and what sources, if any, would you consult in analyzing this problem? This question is not meant to repeat your answers from Question #2 nor is it meant to drill further into accounting principles. Rather you should discuss how you would address this problem as a general manager at Dobbins. What factors are important and what steps would you take to approach this issue?
Attachment:- Assignment Files.rar