MYLAB ACCOUNTING NEW DESIGN WITH ETEXT
6th Edition
ISBN: 9780136723813
Author: MILLER-NOBLES
Publisher: PEARSON
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Question
Chapter 1, Problem 1.1FC
1.
To determine
Fraud Case
In the present case, E is a building contractor and is facing its first annual net loss after losing number of big law-suits. To satisfy the creditors of the company who are pressuring for a positive net income for the year, H told A to record the short-term bank loan of $10,000 as “construction revenue” instead of a loan. According to him, this can work as turn-around for the company to show positive net income that could be corrected through reversing entry in the month of January when the loan is to be repaid.
To identify: The actions that affect the year-end income statement and
2.
To determine
To Explain: How the fraudulent actions affect the company’s creditors.
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Exeter is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss as the end of the year approached. The owner, Hank Snow, was under intense pressure from the company’s creditors to report positive net income for the year. However, he knew that the controller, Alice Li, had arranged a short-term bank loan of $10,000 to cover a temporary shortfall of cash. He told Alice to record the incoming cash as “construction revenue” instead of a loan. That would nudge the company’s income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid.
Requirement
How would this action affect the year-end income statement? how would it affect the year-end balance sheet?
If you were one of the company's creditors, how would this fraudulent action affect you?
Exeter is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss as the end of the year approached. The owner, Hank Snow, was under intense pressure from the company’s creditors to report positive net income for the year. However, he knew that the controller, Alice Li, had arranged a short-term bank loan of $10,000 to cover a temporary shortfall of cash. He told Alice to record the incoming cash as “construction revenue” instead of a loan. That would nudge the company’s income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid.
Requirements
How would this action affect the year-end income statement? How would it affect the year-end balance sheet?
If you were one of the company’s creditors, how would this fraudulent action affect you?
Colleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhino Enterprises as a basis for granting the loan. Colleen has told her accountant to provide the bank with a balance sheet. Colleen has decided to omit the other financial statements because there was a net loss during the past year.
Given this scenario, share your thoughts on the following questions.
Is Colleen behaving in a professional manner by omitting some of the financial statements? Why or Why not
What impact could this omission have on the business or the bank, which is loaning the money?
Chapter 1 Solutions
MYLAB ACCOUNTING NEW DESIGN WITH ETEXT
Ch. 1 - Prob. 1QCCh. 1 - Prob. 2QCCh. 1 - Prob. 3QCCh. 1 - Prob. 4QCCh. 1 - Prob. 5QCCh. 1 - Which of the following requires accounting...Ch. 1 - At the end of a recent year, Global Cleaning...Ch. 1 - Consider the overall effects on Global Cleaning...Ch. 1 - Assume that Global Cleaning Service performed...Ch. 1 - The balance sheet reports the a. financial...
Ch. 1 - Assume Global Cleaning Service had net income of...Ch. 1 - What is accounting?Ch. 1 - Prob. 2RQCh. 1 - Prob. 3RQCh. 1 - Prob. 4RQCh. 1 - Prob. 5RQCh. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 8RQCh. 1 - Prob. 9RQCh. 1 - Which concept states that accounting information...Ch. 1 - Financial statements in the United States are...Ch. 1 - Prob. 12RQCh. 1 - Prob. 13RQCh. 1 - Prob. 14RQCh. 1 - Prob. 15RQCh. 1 - Prob. 16RQCh. 1 - List the four financial statements. Briefly...Ch. 1 - What is the calculation for return on assets...Ch. 1 - Identifying users of accounting information For...Ch. 1 - Prob. 1.2SECh. 1 - Prob. 1.3SECh. 1 - Prob. 1.4SECh. 1 - Applying accounting assumptions and principles...Ch. 1 - S1-6 Using the accounting equation
Thompson...Ch. 1 - Prob. 1.7SECh. 1 - Identifying accounts Consider the following...Ch. 1 - Using the accounting equation to analyze...Ch. 1 - Using the accounting equation to analyze...Ch. 1 - Identifying accounts on the financial statements...Ch. 1 - Use the following information to answer Short...Ch. 1 - Prob. 1.13SECh. 1 - Prob. 1.14SECh. 1 - Prob. 1.15SECh. 1 - Prob. 1.16SECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - E1-23 Using the accounting equation
During 2018,...Ch. 1 - Prob. 1.24ECh. 1 - Using the accounting equation to analyze...Ch. 1 - Using the accounting equation to analyze business...Ch. 1 - Using the accounting equation to analyze business...Ch. 1 - Prob. 1.28ECh. 1 - E1-29 Using the accounting equation to analyze...Ch. 1 - Preparing the financial statements Estella Osage...Ch. 1 - Use the following information to answer Exercises...Ch. 1 - Use the following information to answer Exercises...Ch. 1 - Prob. 1.33ECh. 1 - Prob. 1.34ECh. 1 - Use the following information to answer Exercises...Ch. 1 - Prob. 1.36ECh. 1 - Preparing the statement of cash flows For each...Ch. 1 - Prob. 1.38ECh. 1 - E1-39 Calculating Return on Assets
Alice Appliance...Ch. 1 - P1-40A Using the accounting equation for...Ch. 1 - P1-41A Using the accounting equation for...Ch. 1 - P1-42A Preparing financial statements
Presented...Ch. 1 - P1-43A Preparing financial statements
Picture...Ch. 1 - Prob. 1.44APCh. 1 - Prob. 1.45APCh. 1 - Prob. 1.46APCh. 1 - Prob. 1.47BPCh. 1 - P1-48B Using the accounting equation for...Ch. 1 - Prob. 1.49BPCh. 1 - Prob. 1.50BPCh. 1 - P1-51B Preparing financial statements
The...Ch. 1 - Prob. 1.52BPCh. 1 - P1-53B Using the accounting equation for...Ch. 1 - P1-55 Using the accounting equation for...Ch. 1 - Prob. 1.1TICh. 1 - Lets examine a case using Gregs Tunes and Sals...Ch. 1 - The tobacco companies have paid billions because...Ch. 1 - Prob. 1.1FCCh. 1 - > Financial Statement Case 1-1
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