The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of $600 per month plus 5%?
D asked:
The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of $600 per month plus 5% of yearly profits over $500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000.
The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of $600 per month plus 5% of yearly profits over $500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000.
Should Hamilton follow his boss’s directive?
Who is harmed if the estimates are increased?
Is Matt Rich’s directive ethical?
- No.
- The Dotson company, the tax office, the country is harmed.
- No. provisions for bad debts can be increased based on balance sheet reviews of the un-collectible A/R but any efforts to mi-represent a financial statement is actually a criminal offence.
Cheers… adiwsusanto