College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756



College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem


Maura Lowe is a payroll accountant for N & L Company. She prepares and processes the company’s payroll on a weekly basis and has been at N & L for only three months. All employees are paid on Friday. On Wednesday afternoon, Simon Lentz, one of the company’s top sales associates, asks Maura to not take out any payroll deductions from his pay this week. He explains that he is short of cash and needs the full amount of his gross salary just to put food on the table and make his past-due car payment. He promises Maura that she can catch up on the deductions over the next month. The deductions include employee income tax. Social Security tax. Medicare tax, and health insurance premiums.

1. Is Simon’s request of Maura ethical? Why or why not?

2. If this were the first pay period of the year and Maura agreed not to take out deductions from Simon’s pay, what effect would this have on the liabilities section of the balance sheet?

3. Write a short paragraph from Maura to Simon explaining how omitting deductions from a pay period will cause errors in the company’s financial statements.

4. In small groups, discuss what action Maura should take regarding Simon’s request.


To determine

Indicate and explain whether the request made by the Person S to Person M is ethical.


The request made by the Person S is unethical because Person S decided to withhold the pay on...


To determine

Explain the effect that will have on liabilities section of the balance sheet.


To determine

Write a paragraph explaining the manner by which omitting deductions from pay period affects the company’s financial statement.


To determine

Discuss the action that should be taken Person M regarding the Person S’s request.

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