Concept explainers
Ever since he was a kid, Carl Montague wanted to be a pro football player. When that didn’t work out, he found another way to channel his natural competitive spirit: He bought a small auto parts store in Kentucky that was deep in red ink (negative earnings). At the end of the year, he created “ghost” inventory by recording fake inventory purchases. He offset these transactions by “adjustments” to Cost of Goods Sold, thereby boosting profit and strengthening the
Requirements
1. Name several parties that could have been hurt by the actions of Carl Montague.
2. What kind of adjustment to Cost of Goods Sold (debit or credit) would have the effect of boosting earnings?
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Horngren's Financial & Managerial Accounting (5th Edition)
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