Reference no: EM133153542

James Branch is the president of Root Corporation, a public traded corporation. At the beginning of the year, Branch incorrectly predicted that company's earnings would increase by 25% by end of year. Unfortunately, sales have been less that forecasted, and in the final quarter, Branch determined that significant action need to be taken in order to meet earnings projections.

Therefore, Branch directed all expenditures that could be postponed to the following fiscal year be postponed including purchases from suppliers, repairs and maintenance on factory equipment, employee training, advertising and travel. Branch expects substantial inventory on hand at end of year and encouraged its controller to scrutinize all costs and reclassify as many period costs as product costs.

Write a brief introduction of the situation.

List the different costs the president requested be postponed to the next fiscal year and describe their classification and impact of postponing the costs on the earnings of the corporation.

Explain the effect of reclassifying period costs to product costs on the earnings of the corporation.

Explain whether you believe the president's actions are ethical. Address the postponement and reclassification of expenses separately. Why or why not?