The net income of Sogo & Sons, a department store, decreased sharply during 2019. Mohan Sogo, manager of the store, anticipates the need for a bank loan in 2020. Late in 2019, Mohan Sogo instructs the store’s accountant to record a RM2,000 sale of furniture to the Sogo’s family, even though the goods will not be shipped from the manufacturer until January 2020. Mohan Sogo also tells the accountant not to make the following 31st December 2019, adjusting entry: Salaries owed to employees Prepaid insurance that has expired RM900 400 Requirements: 2(a). Compute the overall effects of these transactions on the store’s reported income for 2019. 2(b). Why is Mohan Sogo taking this action? Is his action ethical? Give your reason, identifying the parties helped and the parties harmed by his action. 2(c). As a personal friend, what advice would you give the accountant?
The net income of Sogo & Sons, a department store, decreased sharply during 2019. Mohan Sogo, manager of the store, anticipates the need for a bank loan in 2020. Late in 2019, Mohan Sogo instructs the store’s accountant to record a RM2,000 sale of furniture to the Sogo’s family, even though the goods will not be shipped from the manufacturer until January 2020. Mohan Sogo also tells the accountant not to make the following 31st December 2019,
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Salaries owed to employees Prepaid insurance that has expired |
RM900 400 |
Requirements:
2(a). Compute the overall effects of these transactions on the store’s reported income for 2019.
2(b). Why is Mohan Sogo taking this action? Is his action ethical? Give your reason, identifying the parties helped and the parties harmed by his action.
2(c). As a personal friend, what advice would you give the accountant?
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