Chapter 3, Problem 3.1EI

To determine

1)

Impact of adjusting entries on Financial Statements

Adjusting entries are passed in the books of accounts at the end of the year to record certain transactions that are required to be journalized in order to comply with applicable regulatory and legal framework.

Examples of adjusting entries are recording of unearned revenue and amortization of intangible assets over their respective useful lives.

Impact of non-recording of adjusting entries on financial statements.

To determine

2)

Ethical Dilemmas in Accounting

Ethical Dilemmas in accounting refer to scenarios where one must put the interest of the stakeholders of the financial statements over one’s own personal interest. Example of such a scenario is understating of expenses and overstatement of revenues to present a healthier set of financial statements.

It can be difficult to do so but for the sake of the trust placed by the stakeholders in those charged with governance, personal interest must be placed second as compared to the professional responsibility.

Reasons for actions of Mr. Steinbach, Ethical validity and impacted parties by such action.

To determine

3)

Ethical Dilemmas in Accounting

Ethical Dilemmas in accounting refer to scenarios where one must put the interest of the stakeholders of the financial statements over one’s own personal interest. Example of such a scenario is understating of expenses and overstatement of revenues to present a healthier set of financial statements.

It can be difficult to do so but for the sake of the trust placed by the stakeholders in those charged with governance, personal interest must be placed second as compared to the professional responsibility.

Correct treatment for the adjusting entries.