Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 2.1CTFC
Roy Akins was the
Requirements
1. How did the change in the journal entries affect the net income of the company at year-end?
2. Who gained and who lost as a result of these actions?
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Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.
Requirements
How did the change in the journal entries affect the net income of the company at year-end?
How did the change in the journal entries affect the net income of the company at year-end?
Roy Rogers is the accounting manager at Tire, Inc, a tire manufacturer. He plays golf with
the CEO, who is somewhat of a celebrity in the local community. The CEO would be able
to receive a huge bonus if the company increases net income by the end of the year. Roy,
wanting to become part of the elite circle the CEO was in, explained he knows some tricks
to increase the company income. This would require revising some journal entries on the
rent paid on storage units used by the company. Roy changed the rental payments to
prepaid rent, allowing the CEO to receive his bonus and the revisions were never
discovered.
1. By Roy changing the journal entries how did it cause the net income to increase
and the CEO to get his bonus?
2. With the change of the journal entries, who gained and who lost?
3. What are the consequences of Roys actions if they are discovered?
Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle. He boasted to Hugh he knew of some accounting tricks to increase the company’s income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits form “rent expense” to “prepaid rent” on several entries. Later Hugh got his bonus, and the deviations were never discovered.
How did the change in the journal entries affect the net income of the company at year-end?
Who gained and who lost as a result of these actions?
Chapter 2 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Ch. 2 - The detailed record of the changes in a particular...Ch. 2 - Which of the following accounts is a liability? a....Ch. 2 - The left side of an account is used to record...Ch. 2 - Which of the following statements is correct? a....Ch. 2 - Prob. 5QCCh. 2 - Prob. 6QCCh. 2 - Posting a 2,500 purchase of office supplies on...Ch. 2 - Prob. 8QCCh. 2 - Which sequence correctly summarizes the accounting...Ch. 2 - Nathville Laundry reported assets of 800 and...
Ch. 2 - Identify the three categories of the accounting...Ch. 2 - What is the purpose of the chart of accounts?...Ch. 2 - What does a ledger show? Whats the difference...Ch. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - When are credits increases? When are credits...Ch. 2 - Prob. 8RQCh. 2 - What are source documents? Provide examples of...Ch. 2 - Prob. 10RQCh. 2 - Explain the five steps in journalizing and posting...Ch. 2 - Prob. 12RQCh. 2 - Prob. 13RQCh. 2 - What is the purpose of the trial balance?Ch. 2 - Prob. 15RQCh. 2 - If total debits equal total credits on the trial...Ch. 2 - What is the calculation for the debt ratio?...Ch. 2 - Identifying accounts Consider the following...Ch. 2 - Identifying increases and decreases in accounts...Ch. 2 - Identifying normal balances For each account,...Ch. 2 - Prob. 2.4SECh. 2 - Journalizing transactions Arkansas Sales...Ch. 2 - Prob. 2.6SECh. 2 - Prob. 2.7SECh. 2 - Preparing a trial balance Henderson Floor...Ch. 2 - Calculating debt ratio Vacuum Magic Carpet Care...Ch. 2 - Using accounting vocabulary March the accounting...Ch. 2 - Creating a chart of accounts Raymond Autobody Shop...Ch. 2 - Identifying accounts, increases in accounts, and...Ch. 2 - Identifying increases and decreases in accounts...Ch. 2 - Identifying source documents For each transaction,...Ch. 2 - Analyzing and journalizing transactions As the...Ch. 2 - Use the following information to answer Exercises...Ch. 2 - Use the following information to answer Exercises...Ch. 2 - Use the following information to answer Exercises...Ch. 2 - Use the following information to answer Exercises...Ch. 2 - Analyzing transactions from T-accounts The first...Ch. 2 - Journalizing transactions from T-accounts In...Ch. 2 - Preparing a trial balance The accounts of Aker...Ch. 2 - Preparing a trial balance from T-accounts The...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Prob. 2.25ECh. 2 - Prob. 2.26ECh. 2 - Correcting errors in a trial balance The following...Ch. 2 - Prob. 2.28ECh. 2 - Problems Group A Journalizing transactions,...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Correcting errors in a trial balance The trial...Ch. 2 - Preparing financial statements from the trial...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Journalizing transactions, posting journal entries...Ch. 2 - Prob. 2.38BPCh. 2 - Prob. 2.39BPCh. 2 - Prob. 2.40BPCh. 2 - Journalizing transactions, posting to T-accounts,...Ch. 2 - Journalizing transactions, posting to T-accounts,...Ch. 2 - Your friend, Dean McChesney, requested that you...Ch. 2 - Prob. 2.1CTEICh. 2 - Roy Akins was the accounting manager at Zelco, a...Ch. 2 - Prob. 2.1CTFSCCh. 2 - In 35 words or fewer, explain the difference...
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