Advanced Managerial Accounting
ACT 5733 – Advanced Managerial Accounting
Home Work Questions
Question #1
CF is the new controller for the consumer division of ABC company. In the past five years, ABC’s earnings have grown by at least 15% annually, with the consumer division’s earnings growing by over 20% annually over the same time-period. In the 4th quarter of the current year, however, it is projected that consumer’s income will grow by 8% and ABC’s will grow by 10%. ML, consumer division’s president, wants CF to take some of the following “end of the year” actions in order to improve consumer’s reported earnings. Under the previous controller, these types of actions were more or less taken as acceptable practices.
1) Deferring routine monthly maintenance on equipment by an outside vendor until January.
2) Extending the close of the fiscal year beyond December 31 so that some sales from next year are counted in the current fiscal year.
3) Altering dates on shipping documents so that sales made in January of the next year appear to have occurred in December of the current year.
4) Giving salespeople a double bonus to exceed December targets.
5) Reducing the number of December advertising spots and increasing the number to be run in January.
6) Deferring advertising costs by asking the outside advertising agency to delay sending out bills for December advertisements until January or by having the agency indicate that advertisements run in December were run in January.
7) Persuading customers to accept merchandise for shipment in December that they would normally not order until the following year.
a) Classify each of these possible actions as “acceptable” or “unacceptable” according to the IMA Standards of Ethical Behavior for Practitioners of Management Accounting and Financial Management. Be sure to justify / explain your classifications.
1 – Acceptable, since the maintenance was not actually performed in December.
2 – Unacceptable, since this violates GAAP.
3
Home Work Questions
Question #1
CF is the new controller for the consumer division of ABC company. In the past five years, ABC’s earnings have grown by at least 15% annually, with the consumer division’s earnings growing by over 20% annually over the same time-period. In the 4th quarter of the current year, however, it is projected that consumer’s income will grow by 8% and ABC’s will grow by 10%. ML, consumer division’s president, wants CF to take some of the following “end of the year” actions in order to improve consumer’s reported earnings. Under the previous controller, these types of actions were more or less taken as acceptable practices.
1) Deferring routine monthly maintenance on equipment by an outside vendor until January.
2) Extending the close of the fiscal year beyond December 31 so that some sales from next year are counted in the current fiscal year.
3) Altering dates on shipping documents so that sales made in January of the next year appear to have occurred in December of the current year.
4) Giving salespeople a double bonus to exceed December targets.
5) Reducing the number of December advertising spots and increasing the number to be run in January.
6) Deferring advertising costs by asking the outside advertising agency to delay sending out bills for December advertisements until January or by having the agency indicate that advertisements run in December were run in January.
7) Persuading customers to accept merchandise for shipment in December that they would normally not order until the following year.
a) Classify each of these possible actions as “acceptable” or “unacceptable” according to the IMA Standards of Ethical Behavior for Practitioners of Management Accounting and Financial Management. Be sure to justify / explain your classifications.
1 – Acceptable, since the maintenance was not actually performed in December.
2 – Unacceptable, since this violates GAAP.
3