
Concept explainers
(a)
Ethical Case
Case Summary: “W” Corporation is a whole seller of the automotive parts. It has 10 stockholders who are receiving $1 million as total dividends for last 8 years. The board’s policy is to pay the dividends until the net income exceeds $1 million and the president and CEO, G.R’s job is secured till he could garner that much in the cash provided from the operating activities each year. But in the current year S.G the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks S.G to make it to the minimum level of $1 million. S.G has misclassified one two year note-payable of $60,000 into a bank loan and managed to show net cash provided by the operating activities as $1,030,000 and saved G.R, the president.
To Identify: The stakeholders in this situation.
(b)
To Identify: The possibility of any unethical actions on the part of the president and the possibility of any unethical actions on the part of the accountant.
(c)
To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

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Chapter 10 Solutions
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