Ethics in Action Head Donuts Inc. is a retailer of designer headphones, earphones, and hands-free audio devices. Polly Ester, the company president, is reviewing the company’s financial statements after the dose of the fiscal year and is troubled that earnings decreased by 10%. She shares her concerns with the company’s chief accountant, Lucas Simmons, who points out that the drop in earnings was balanced by a 20% increase in cash flows, from operating activities. Polly is encouraged by the increase in cash flows from operating activities, but Ls worried that investors might miss this information because it is “buried” in the statement of cash flows. To make it easier for investors to find this information, she instructs Lucas to include an operating cash flow per share number on the face of the income statement, directly below earnings per share. While Lucas is concerned about using such an unconventional financial reporting tactic, he agrees to include the information on the income statement. Is Lucas behaving in an ethical and professional manner? Explain your answer.

BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169

Solutions

Chapter 13, Problem 13.1TIF
Textbook Problem

Ethics in Action

Head Donuts Inc. is a retailer of designer headphones, earphones, and hands-free audio devices. Polly Ester, the company president, is reviewing the company’s financial statements after the dose of the fiscal year and is troubled that earnings decreased by 10%. She shares her concerns with the company’s chief accountant, Lucas Simmons, who points out that the drop in earnings was balanced by a 20% increase in cash flows, from operating activities. Polly is encouraged by the increase in cash flows from operating activities, but Ls worried that investors might miss this information because it is “buried” in the statement of cash flows. To make it easier for investors to find this information, she instructs Lucas to include an operating cash flow per share number on the face of the income statement, directly below earnings per share. While Lucas is concerned about using such an unconventional financial reporting tactic, he agrees to include the information on the income statement.

Is Lucas behaving in an ethical and professional manner? Explain your answer.

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Chapter 13 Solutions

Corporate Financial Accounting
Ch. 13 - Classifying cash flows Identify whether each of...Ch. 13 - Adjustments to net incomeindirect method Ripley...Ch. 13 - Changes in current operating assets and...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Land transactions on the statement of cash flows...Ch. 13 - Common stock transactions on the statement of cash...Ch. 13 - Free cash flow Dillin Inc. reported the following...Ch. 13 - Appendix 2 Cash received from customersdirect...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Cash flows from operating activitiesnet loss...Ch. 13 - Effect of transactions on cash flows Slate the...Ch. 13 - Classifying cash flows Identify the type of cash...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Reporting changes in equipment on statement of...Ch. 13 - Reporting land transactions on statement of cash...Ch. 13 - Determining cash payments to stockholders The...Ch. 13 - Reporting stockholders' equity items on statement...Ch. 13 - Reporting land acquisition for cash and mortgage...Ch. 13 - Reporting issuance and retirement of long-term...Ch. 13 - Determining net income from net cash flow from...Ch. 13 - Cash flows from operating activitiesindirect...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method List the...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Determining selected amounts for cash flows from...Ch. 13 - Cash flows from operating activities direct method...Ch. 13 - Cash flows from operating activitiesdirect method...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flowsdirect method The...Ch. 13 - Statement of cash flows direct method applied to...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flows indirect method The...Ch. 13 - Statement of cash flowsindirect method The...Ch. 13 - Statement of cash flows direct method The...Ch. 13 - Statement of cash flowsdirect method applied to PR...Ch. 13 - Free Cash Flow Analyze and compare Amazon.com,...Ch. 13 - Analyze and compare Apple, Coca-Cola, and Verizon...Ch. 13 - Analyze Aeropostale Aeropostale, Inc. (AROPQ) is a...Ch. 13 - Analyze and compare ATT and Facebook ATT Inc. (T)...Ch. 13 - Analyze Priceline The Priceline Group Inc. (PCLN)...Ch. 13 - Ethics in Action Head Donuts Inc. is a retailer of...Ch. 13 - Communication Tidewater Inc., a retailer, provided...Ch. 13 - Using the statement of cash flows You are...

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