Reference no: EM132954425

Penny is the first Controller (Internal Accountant) ever hired at a medium-sized farm machinery company. The firm rents out farm machinery.

• One of Penny's initial goals is to determine how accurately the farm equipment is valued. As she walks with Ron, the inventory control clerk, she notices that numerous parts and machines look rusty and dusty. Ron informs her that "many have been sitting on these skids for years." As Penny inquires further, it appears that this problem is extensive, and that much of the equipment is old and not often rented out.
• Finally, Penny approaches Art, the Company President, about this problem and asks what he intends for her to do about the dilemma. Art informs her that he believes that many of these items are still rentable and require the sales staff to be more aggressive in their marketing.
• As the auditor from Revenue Canada is coming for a visit next week, Penny is worried about what to say. Art reiterates his former response and tells her to emphasize the machinery that is already rented out and not let them "nose around too much".

Problem 1: What accounts does the owner want understated or overstated?

Problem 2: What accounting procedure is the owner wanting to avoid?

Problem 3: How do the owner's wishes affect the balance sheet?

Problem 4: What GAAP principles is the owner not following?

Problem 5: Is the owner being ethical in his accounting practises?