The net income of EZ Furniture decreased sharply during 2023. Mariah Tessier, owner of the store, anticipates the need for a bank loan in 2024. Late in 2023, she instructs the accountant to record a $35,000 sale of furniture to the Tessier family, even though the goods will not be shipped from the manufacturer until January 2024. Tessier also tells the accountant not to make the following December 31, 2023, adjusting entries:

Required

1. Compute the overall effect of these transactions on the store’s reported income for 2023.

2. Why did Tessier take this action? Is this action ethical? Give your reason, identifying the parties helped and the parties harmed by Tessier’s action.

3. As a personal friend, what advice would you give to the accountant?

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Salaries owed to employees............ Prepaid insurance that has expired.. ........ $27,000 1,500