The net income of Sola's Photography Company decreased sharply during 2010. Lisa Almond, owner of the company,
Question:
Almond also told Lail not to make the following December 31, 2010, adjusting entries:
Salaries owed to employees . . . . . . . . . $10,000
Prepaid insurance that has expired . . . . . 1,000
Requirements
1. Compute the overall effect of these transactions on the company’s reported income for
2010. Is reported net income overstated or understated?
2. Why did Almond take these actions? Are they ethical? Give your reason, identifying the parties helped and the parties harmed by Almonds action. Consult the Decision Framework for Making Ethical Judgments in Chapter 1. Which factor (economic, legal, or ethical) seems to be taking precedence? Identify the stakeholders and the potential consequences to each.
3. As a personal friend of Brads, what advice would you give him?
Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...
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Related Book For
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
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