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Courtney Foster, the manager of the purchasing department for The Home Depot, has just returned from a staff meeting. The controller, Kelly Brammer, has asked Courtney to purchase a large number of wood boards at year$-$end as a means of lowering net income. Courtney$$s job, as manager of the purchasing department, is to buy wood boards at the best possible price. At the beginning of the year, she was purchasing the boards for $$12$ per board. The price is currently $$20$ per board. Normally she would wait until next year to see if the price drops, but she is now forced to purchase boards at $$20$ each to meet the request of the controller. The company uses the LIFO method of inventory valuation, but she doesn$$t know what this means. She wonders if it is $$right$$ to use the purchase of an inventory item to manipulate net income and has asked you for advice, since she knows you are taking an accounting class.

Why does this year$-$end inventory purchase of wood boards lower net income?

Select one:

a$.$ The ending inventory will be stated at a higher amount than if FIFO was used.

b$.$ Since the company is using LIFO, the last items purchased will be included in the cost of good sold.

c$.$ Because the company is spending cash to purchase more inventory.

d$.$ The controller made a mistake; the purchase of inventory has no bearing on the amount of net income.

e$.$ A lower cost of goods sold reduces net income.

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