6th Edition

ISBN: 9780135445631

Author: MILLER-NOBLES

Publisher: PEARSON

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Depreciation Accounting

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Textbook Question

Chapter 2, Problem 2.1FC

Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.

Requirements

1. How did the change in the journal entries affect the net income of the company at year-end?

2. Who gained and who lost as a result of these actions?

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Chapter 2, Problem 2.1EI

Chapter 2, Problem 2.1FSC

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Chapter 2 Solutions

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Solution Summary: The author analyzes how the change in journal entries affects the net income of the company at the year end.

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Chapter 2 Solutions