EXERCISE P-4 Ethics and the Manager
Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele.
Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability ofthese stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues;the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.
Required:
- According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory as obsolete?
- Would it be easy for Perlman to take the ethical action in this situation? (CMA, adapted)

Trending nowThis is a popular solution!

Chapter P Solutions
MANAGERIAL ACCOUNTING ACCESS CARD
- Depreciation is recorded in the books to:A. Allocate the cost of an asset over its useful lifeB. Estimate the resale value of assetsC. Track market valueD. Match expenses with liabilities no aiarrow_forward1. Which financial statement shows a company's financial position at a specific point in time?A. Income StatementB. Statement of Cash FlowsC. Balance SheetD. Retained Earnings Statementno aiarrow_forwardI am looking for help with this general accounting question using proper accounting standards.arrow_forward
- 1. Which financial statement shows a company’s financial position at a specific point in time?A. Income StatementB. Statement of Cash FlowsC. Balance SheetD. Retained Earnings Statementarrow_forwardI need help finding the accurate solution to this financial accounting problem with valid methods.arrow_forward4. Depreciation is recorded to:A. Match cash flowsB. Reflect a decline in market valueC. Allocate cost of an asset over its useful lifeD. Increase net incomeno AIarrow_forward
- 4. Depreciation is recorded to:A. Match cash flowsB. Reflect a decline in market valueC. Allocate cost of an asset over its useful lifeD. Increase net incomeneed helparrow_forward4. Depreciation is recorded to:A. Match cash flowsB. Reflect a decline in market valueC. Allocate cost of an asset over its useful lifeD. Increase net incomearrow_forwardWhich of the following is a contra asset account?A. Accounts PayableB. Accumulated DepreciationC. InventoryD. Notes Receivable no Aiarrow_forward
- Please provide the correct answer to this financial accounting problem using accurate calculations.arrow_forward6. Which of the following is a contra asset account?A. Accounts PayableB. Accumulated DepreciationC. InventoryD. Notes Receivableneed helparrow_forward6. Which of the following is a contra asset account?A. Accounts PayableB. Accumulated DepreciationC. InventoryD. Notes Receivablearrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningAccounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning





