Mogo Manufacturing Company Accounts for Its Inventories by the FIFO

question 105

Essay

Mogo Manufacturing Company accounts for its inventories by 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, 2017, the accountant realized that 5 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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Definitions:

Morphine

A powerful opiate analgesic medication derived from opium, used to relieve severe pain.

Substances

Materials or items with distinct physical composition, potentially used in a variety of contexts, including chemical, legal, or medical fields.

FDA

The Food and Drug Administration is a federal agency of the United States Department of Health and Human Services, responsible for protecting public health by ensuring the safety, efficacy, and security of human and veterinary drugs, biological products, and medical devices; and by ensuring the safety of the nation's food supply, cosmetics, and products that emit radiation.

Manufacture

The process of making products on a large scale using machinery.