Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Ethical Dilemma What’s an expense?

Many years ago, Wilson Blowhard founded a communications company. The company became victorious and grew by expanding its customer base and acquiring some of its competitors. Actually, most of its growth resulted from acquiring other companies. Mr. Blowhard is adamant regarding continuing the company’s growth and increasing its net worth. To accomplish these goals, the business’s net income should continue to increase at a rapid pace.

If the company’s net worth continues to rise, Mr. Blowhard plans to sell the company and retire. He is, thus, focused on improving the company’s profit any way he can.

In the communications business, companies often employ the lines of other communications companies. This line usage is an important operating expense for Mr. Blowhard’s company.

Commonly accepted accounting principles need operating costs like line employ to be expensed as they are acquired each year. Each dollar of line cost reduces net income by a dollar.

After reviewing the company’s operations, Mr. Blowhard concluded that the company didn’t currently need all of the line use it was paying for. It was actually paying the owner of the lines.

Now so that the line use would be accessible in the future for all of Mr. Blowhard’s anticipated new customers. Mr. Blowhard instructed his accountant to capitalize all of the line cost charges and depreciate them over 10 years. The accountant reluctantly followed Mr. Blowhard’s instructions and the company’s net income for the current year showed a significant raise over the prior year’s net income. Mr. Blowhard had found a manner to report continued enlargement in company’s net income and increase the value of company.

Required

a. How does Mr. Blowhard’s scheme affect the amount of income that the company would otherwise report in its financial statements and how does the system affect the company’s balance sheet?

b. Give explanation of your answer.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M91598

Have any Question? 


Related Questions in Accounting Basics

As you begin this assignment review the broad range of

As you begin this Assignment, review the broad range of topics presented throughout the course related to using accounting information for decision making. Clearly, 8 weeks does not provide enough time to explore all the ...

Final paperwrite a five- to seven-page financial statement

Final Paper Write a five- to seven-page financial statement analysis of a public company, formatted according to APA style as outlined in the Ashford Writing Center. In this analysis, you will discuss the financial healt ...

Garner company began operations on january 1 2010 and uses

Garner Company began operations on January 1, 2010, and uses the average cost method of pricing inventory. Management is contemplating a change in inventory methods for 2013. The following information is available for th ...

Assignmentfactsthe w company civil engineers consists of

ASSIGNMENT Facts: The W Company Civil Engineers consists of two divisions. The divisions are Water and Waste Water. The company sells engineering services to various customers. The following are the bill rates for the va ...

Assignment reorganizationtarget corporation holds assets

Assignment: Reorganization Target Corporation holds assets with a fair market value of $4 million (adjusted basis of $2.2 million) and liabilities of $1.5 million. It transfers assets worth $3.7 million to Acquiring Corp ...

Question 1 which of the following results in an increase in

Question 1. Which of the following results in an increase in the equity in investee income account when applying the equity method? Unrealized gain on intercompany inventory transfers for the prior year Amortizations of ...

Accountingi for the month of january jims landscaping

Accounting I. For the month of January Jim's Landscaping Company has the following transactions: 1. Borrowed $5,000 from First National Bank on a note due in two years. 2. Received $12,500 cash from investors and issued ...

Accountingcase to assess assurance of learning goal ethical

Accounting Case to assess Assurance of Learning Goal (Ethical Perspectives) Michael Greer is the Marketing Vice President for Atlantic Lubricants headquartered in Boston with extensive operations in New York City that se ...

Key information for the plant city divisionkey information

Key Information For The Plant City Division Key information for the Plant City Division (PCD) of Barkley Industries for 2015 are as follows: Revenues $15,000,000 Operating Income 1,800,000 Total Assets 10,000,000 PCD man ...

Discussion1st discussionexamine the customer and vendor

Discussion 1st Discussion: Examine the customer and vendor functions in QuickBooks. • Use one scenario or example to explain a feature or function that will help you make better management decisions in regard to customer ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen