Ethical Case Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president. To Identify: The stakeholders in this situation.

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Answer 1

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Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

(b)

To determine

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 determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

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Answer 2

Question

Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

(b)

To determine

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 determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

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Answer 3

Question

Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

(b)

To determine

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 determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

(b)

To determine

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 determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

(b)

To determine

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 determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

Answer 6

Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

Answer 7

Chapter 12, Problem 12.9EYCT

(a)

To determine

Ethical Case

Case Summary: Company P 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, H’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 K the controller presents a statement where the cash provided by the operating activities are shown as $970,000, and thus president asks K to make it to the minimum level of $1 million. K 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 H, the president.

To Identify: The stakeholders in this situation.

Answer 8

(b)

To determine

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.

Answer 9

(b)

To determine

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.

Answer 10

(c)

To determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

Answer 11

(c)

To determine

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Prob. 3Q Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - Prob. 6Q Ch. 12 - Why is it necessary to use comparative balance...Ch. 12 - Prob. 8Q Ch. 12 - Prob. 9Q Ch. 12 - Prob. 10Q

Solution Summary: The author explains how the board of directors and the accountant are likely to detect the misclassification by the company P.

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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.

To Ascertain: If the board of directors or anyone else is likely to discover the misclassification.

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