Mogo Manufacturing Company Accounts for Its Inventories by the FIFO

question 14

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,2014,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:

Antitrust Law

Legislation designed to promote competition and regulate and prevent monopolies or other practices that restrain trade.

Legal Cartel Theory

A concept that explores the legality and economic implications of a group of firms controlling the market by regulating prices and output like a cartel.

Occupational Licensing

The laws of state or local governments that require that a worker satisfy certain specified requirements and obtain a license from a licensing board before engaging in a particular occupation.

Antitrust Legislation

Laws and regulations designed to promote competition and prevent monopolies or oligopolies by regulating anticompetitive practices among companies.