Should ed grimm be forced to knowingly overstate

Assignment Help Accounting Basics

Reference no: EM132486736

Point 1: Happy Trails, Inc., is a popular family resort just outside Yellowstone National Park. Summer is the resort's busy season, but guests typically pay a deposit at least six months in advance to guarantee their reservations. The resort is currently seeking new investment capital in order to expand operations. The more profitable Happy Trails appears to be, the more interest it will generate from potential investors. Ed Grimm, an accountant employed by the resort, has been asked by his boss to include $2 million of unearned guest deposits in the computation of income for the current year. Ed explained to his boss that because these deposits had not yet been earned they should be reported in the balance sheet as liabilities, not in the income statement as revenue. Ed argued that reporting guest deposits as revenue would inflate the current year's income and may mislead investors. Ed's boss then demanded that he include $2 million of unearned guest deposits in the computation of income or be fired. He then told Ed in an assuring tone, "Ed, you will never be held responsible for misleading potential investors because you are just following my orders."

Instructions

Question a. Should Ed Grimm be forced to knowingly overstate the resort's income in order to retain his job?

Question b. Is Ed's boss correct in saying that Ed cannot be held responsible for misleading potential investors? Discuss.

Reference no: EM132486736

Questions Cloud

How do think the four management functions of planning : How do you think the four management functions of planning, organizing, leading, and controlling fit in with the ideas Sinek expresses in his talk?

Take for the population to reach that number : If the resources in the vial can only support a population of 100 000 bacteria, how long will it take for the population to reach that number?

Topic - Product Costing : Topic - Product Costing. What is a cost object? Give 3 examples. Discuss the importance of selecting an appropriate cost driver for cost allocation

Undertake a performance management review : Prepare for and run an information session - undertake a performance management review with at least 2 team members

Should ed grimm be forced to knowingly overstate : Is Ed's boss correct in saying that Ed cannot be held responsible for misleading potential investors? Discuss. Should Ed Grimm be forced to knowingly overstate

Large aquarium with plenty of resources : You add 20 paramecia (unicellular protists) to a large aquarium with plenty of resources. In the first week, 50 paramecia are produced by binary fission

Identify stakeholders and the impact of the proposed change : Identify stakeholders and the impact of the proposed change on each of the stakeholders (comment letters may provide good insight).

What would be the full journal entry to record the amount : What would be the full journal entry to record the amount? Giada Foods reported $940 million in income before income taxes for 2021

Critical analysis of the financial statements : Managing Finance in Health and Social Care - A critical analysis of the concepts, features and importance of costs and accounting in making decisions in health

User Account

All Pages