The net income of Steinbach & Sons, a landscaping company, decreased sharply during 2016. Mort Steinbach,...

The net income of Steinbach & Sons, a landscaping company, decreased sharply during 2016. Mort Steinbach, owner and manager of the company, anticipates the need for a bank loan in 2017. Late in 2016 Steinback instructs the company's accountant to record $20,000 service revenue for landscape services for the Steinbach family, even though the services will not performed until January 2017. Steinbach also tells the accountant not to make the following December 31, 2016 adjusting entries:

Salaries owed to employees $9,000
Prepaid Insurance that has expired $4,000

1. Why is Steinback taking this action? Is his action ethical? Give your reason.

Solutions

Expert Solution

Solution 1:

Steinbach is initiating such action because the company needs to have a healthy financial statement in order to be approved for the bank loan. Steinbach & Sons can do everything to get the loan as it seems by providing bank with faulty information. The false information represents to bank that Steinbach & Sons actually made more revenue than they are actually earned, By disclosing additional revenue of $20,000 for which service not performed and by not disclosing the salaries owed to employees in the amount of $9,000 and the prepaid insurance that has expired in the amount of $4,000.Therefore, this is not ethical because the company is doing it maliciously and knowingly, it was not an accounting mistake or delay, it was deliberate and a wrongful action since it will increase the chances of the company obtaining a bank loan and thereby increasing the risk of the bank of providing this loan to this company rather than to another company who disclose all facts correctly.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

During the year, Crane’s total liabilities decreased by $100,000. The company reported net income of $80,000,...

During the year, Crane’s total liabilities decreased by $100,000. The company reported net income of $80,000, sold additional shares for $140,000, and did not declare any dividends during the year. What is the amount of total assets at the end of the year?

During 2016 hamm corporation had a net income of 65,000. included on the income statement was...

During 2016 hamm corporation had a net income of 65,000. included on the income statement was depreciation expense of 28,000. Accounts receivable decreased by 8,200, inventories increased by 5,400 and accounts payable decreased by 14,000. use the indirect method to determine cash flows from operating activities.

Phoenix Photography Company experienced a sharp decrease in Net Income during the year 2016. Madea Perry,...

Phoenix Photography Company experienced a sharp decrease in Net Income during the year 2016. Madea Perry, the owner of the company, anticipates a need for a Bank loan in the year 2017. Late in 2016, Perry instructed Reunion Mann, the accountant, and friend of his to record a R10, 000 sale of portraits to the Perry family even though the photos will not be shot until January 2017. Perry told Reunion not to make the following December 31 2016 adjusting...

For 2016, Clapton Company reported a decline in net income. At the end of the year,...

For 2016, Clapton Company reported a decline in net income. At the end of the year, S. Hand, the president, is presented with the following condensed comparative income statement: Clapton Company Comparative Income Statement For the Years Ended December 31, 2016 and 2015 1 2016 2015 2 Sales $7,425,600.00 $6,720,000.00 3 Cost of goods sold 2,688,000.00 2,240,000.00 4 Gross profit $4,737,600.00 $4,480,000.00 5 Selling expenses $1,096,200.00 $870,000.00 6 Administrative expenses 636,300.00 505,000.00 7 Total operating expenses $1,732,500.00 $1,375,000.00 8 Income...

For 2016, Clapton Company reported a decline in net income. At the end of the year,...

For 2016, Clapton Company reported a decline in net income. At the end of the year, S. Hand, the president, is presented with the following condensed comparative income statement: Clapton Company Comparative Income Statement For the Years Ended December 31, 2016 and 2015 1 2016 2015 2 Sales $7,369,600.00 $6,580,000.00 3 Cost of goods sold 2,719,733.00 2,193,333.00 4 Gross profit $4,649,867.00 $4,386,667.00 5 Selling expenses $1,049,600.00 $820,000.00 6 Administrative expenses 658,050.00 535,000.00 7 Total operating expenses $1,707,650.00 $1,355,000.00 8 Income...

Net U.S. energy imports have decreased every year since 2016. Last year’s change in net energy...

Net U.S. energy imports have decreased every year since 2016. Last year’s change in net energy trade (crude oil, natural gas, coal, and petroleum products) in the U.S.—from 3.6 quads of net imports in 2018 to 0.8 quads of net exports in 2019—was the largest change in U.S. energy trade since 1980. How would the current low oil price affect the U.S. crude oil trade (import and export) in 2020? Apply the D-S (demand, supply) model.

Net U.S. energy imports have decreased every year since 2016. Last year’s change in net energy...

Net U.S. energy imports have decreased every year since 2016. Last year’s change in net energy trade (crude oil, natural gas, coal, and petroleum products) in the U.S.—from 3.6 quads of net imports in 2018 to 0.8 quads of net exports in 2019—was the largest change in U.S. energy trade since 1980. How would the low oil price affect the U.S. crude oil trade (import and export) in 2020? Apply the D-S model.

Net U.S. energy imports have decreased every year since 2016. Last year’s change in net energy...

Net U.S. energy imports have decreased every year since 2016. Last year’s change in net energy trade (crude oil, natural gas, coal, and petroleum products) in the U.S.—from 3.6 quads of net imports in 2018 to 0.8 quads of net exports in 2019—was the largest change in U.S. energy trade since 1980. How would the low oil price affect the U.S. crude oil trade (import and export) in 2020? Apply the D-S model.

A company reported Net Income of $1,000,000 for 2015 and $1,000,000 for 2016. After the books...

A company reported Net Income of $1,000,000 for 2015 and $1,000,000 for 2016. After the books have been closed for 2017, it was discovered that the ending inventory for 2015 was overstated by $20,000. Tell the effect that the error had on each of the following: a. Cost of Goods Sold for 2015 as originally reported b. Net Income for 2015 as originally reported c. Cost of Goods Sold for 2016 as originally reported d. Net Income for 2016 as...

during discal 2016 stanley black and decker corporation reported net income of 965.3 million and paid...

during discal 2016 stanley black and decker corporation reported net income of 965.3 million and paid dividends of 330.9 million which of the following describes how these transaction would affect stanley black and decker's equity accounts a- increase contibuted capital by 965.3 and decrease earned capital by 330.9 b- deacres contributed capital by 330.9 and increase earned capital by 965.3 c- increase contributed capital by 634.4 d- increase earned capital by 634.4

Subjects