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Continue paying the salaries next year

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Ethic Case

The Controller for Anderson Electric, Ron Foss, is reviewing the year-end adjusting entries prepared by the accounting staff for approval before they are posted to the general ledger. Angela Bennett, the company president, has suggested the December accrual for wage expense be delayed until January, because the company needs to report a higher net income for the year. The December 31 financial statements will be reviewed for a loan by the bank. The company has a better chance of getting the loan if its net income is higher, and the loan will have a lower interest rate if the company appears to be healthy.

Ron is unsure whether he should comply with the president's request. It doesn't seem to Ron that it is terribly important whether the expenses is recorded in December or January. Ron knows that the company needs the loan to continue paying the salaries next year, so he does not want to do anything to jeopardize his own salary.

Reference no: EM131190135

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