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Practice
1. Below are three line items from a corporation's Income Statement (note: this is NOT the entire Income Statement!). Select the correct line to use and compute the federal tax.
Sales: $335,000
Cost of Goods Sold: $225,000
Net Profit Before Tax: $ 97,000
2. Can you think of a reason financial managers could be tempted to manage earnings?
Is it unethical for managers to manage earnings if they disclose their activities to investors?
Find at least one reference from your book or another source to support each answer.
3. What are the potential risks to a company of unethical behaviors by employees?
What are potential risks to the public and to stakeholders?
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