Ethical Delima
Not what you're looking for?
After reviewing the company's operations, Mr. Blowhard concluded that the company did not currently need all of the line use it was paying for. It was really paying the owner of the lines now so that the line use would be available in the future for all of Mr. Blowhard's expected new customers. Mr. Blowhard instructed his accountant to capitalize all of the line cost charges and depreciate them over 10 years. The accountant reluctantly followed Mr. Blowhard's instructions and the company's net income for the current year showed a significant increase over the prior year's net income. Mr. Blowhard had found a way to report continued growth in the company's net income and increase the value of the company.
Required:
a. How does Mr. Blowhard's scheme affect the amount of income that the company would otherwise report in its financial statements and how does the scheme affect the company's balance sheet? Explain your answer
b. Additionally, given what you have learned about financial accounting so far, think of as many ways that you could "adjust" the financial records to make your company look better yet still follow GAAP and ethical guidelines.
Purchase this Solution
Solution Summary
This posting gives you an in-depth insight into Ethical Delima
Solution Preview
Ethical Delima
After reviewing the company's operations, Mr. Blowhard concluded that the company did not currently need all of the line use it was paying for. It was really paying the owner of the lines now so that the line use would be available in the future for all of Mr. Blowhard's expected new customers. Mr. Blowhard instructed his accountant to capitalize all of the line cost charges and depreciate them over 10 years. The accountant reluctantly followed Mr. Blowhard's instructions and the company's net income for the current year showed a significant increase over the prior year's net income. Mr. Blowhard had found a way to report continued growth in the company's net income and increase the value of the company.
Required:
a. How does Mr. Blowhard's scheme affect the amount of income that the company would otherwise report in its financial statements and how does the scheme affect the company's balance sheet? ...
Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.