Justin Anson Distillery, Inc Essay

Justin Anson Di cool itery, Inc. is a lodge that produces quality whiskey and distributes their product end-to-end America. The smart set has recently has been trying to set forth and affix their production. In order to development their production they need to obtain practically sets in which they can eon their whiskey for the necessary 4 years. This is acquittance to incur the society many more cost in their production and as well growth their roll levels. It is now the truehearteds dilemma how to report these late-sprung(prenominal) costs so their fiscal statements ar accurate but also contrive the growth they are attempting. It is also key that the companies financial statements reflect go away upon the smart set so they can obtain untested loans from the bank to fund their growth. Question synopsisAssuming Anson decided to charge pose costs (but non computer memory and maturation costs) to enumeration, what 2012 income statement and balance sheet i tems would change, and what would the new amounts be? (Assume no change in work-in-process scroll)Charging barrel costs to inventory would affix the direct income on the income statement and increase the amount of assets on the balance sheet. both(prenominal) of these values would increase or fall by the amount of the cost of the barrels, which in 2012 was $4,366. This would increase current assets from $21,813 to $26,179, and the operating income would increase to $6,883.If Ansons suggestion of including all warehousing and aging costs in inventory were accepted, how would the 2012 financial statements be affected? (Assume no change in work-in-process inventory.)The 2012 financial statements would grammatical construction drastically different if this were the case. Originally the costs charged to cost of goods change was much greater in 2012 because the extra barrel costs were charged to this account. If they were charged to inventory instead of the cost of goods sold, the company bequeath visualize a much greater profit. It will also lead to a build of inventory though and the assets of the company will increase dramatically and that will show up in the financials on the balance sheet.In your opinion, what costs should be included in Ansons inventory when preparing financial statements to be submitted to Valley topic Bank? The first thing that the company should do is checking the ethics of any account changes they are planning on making. If it is install that charging these costs to inventory could cause their statements to non meet standards then the changes cannot even be considered. However, if it is acceptable, it would be in the companys best interest to charge unaccompanied barrel costs to inventory.This would allow them to unagitated controllerler their inventory levels by allowing them to control how many barrels they want to purchase. Also, the financial statements will still show operating profits because the cost of barrels not bei ng used as a part of sales wont show up in the costs of goods sold section of the income statement. By including this cost in inventory the company can still report favorable numbers and control their inventory in order to smear the negative effects of inventory build-up that could go against their financials in the future.