Mogo Manufacturing Company Accounts for Its Inventories Using the FIFO

question 42

Essay

Mogo Manufacturing Company accounts for its inventories using the FIFO method.The company has consistently allocated building depreciation to production and general administration on the basis of the number of square feet occupied.According to the measurements used, manufacturing requires 90% of the square footage and general administration utilizes 10% of the total square feet.This year, the accountant realized that five years ago an addition was made to the portion of the building used for general administration, and the depreciation allocation had not been adjusted.What are the tax accounting implications of this discovery?

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