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1. Under Dobbs' FOB policy, when should the company record a sale?
A) The company should record the sale once the patron send the money, and
Dobbs Whole Antiques verifies that it is the correct amount.
2. Do you approve or disapprove of Dobbs' manner of deciding when to ship
goods to customers and record the sales revenue? If you approve, give your
reason. If you disapprove, identify a better way to decide when to ship
goods. (There is no accounting rule against Dobbs' practice)
A) I think the method that Dobbs' uses to decide when to ship good is
unethical . It is unethical because Dobbs delays shipments when they see
that it is in their best interest to delay shipments, once they feel they have
made a profitable revenue. This is unfair to the consumer who pays the
money, and expect their shipment to arrive on time.

2. Requirements
1. What would you think of a company's ethics if it changed accounting
methods every year?
A) I believe that Crop-Paper-Scissors should stick one method of accounting
for inventory because it will reflect their business/financial statement much
more clearly. It will also make sure that they are very consistent with the
financial statements year-in and year-out.
2. What accounting principal would changing methods every year violate?
A) The consistency principal would be violated.
3. Who can be harmed when a company changes its accounting methods too
often? How?
A) A person who is willing to invest in the business in the future would be
harmed by changing accounting methods because the investor will not be
able to clearly interpret each year's figures properly. The figures will also be
distorting due to the change in accounting method used to evaluate the
same item in each corresponding year.

3. Requirements
1. Indentify who, other than O'Conner, could be harmed by this theft. In what
ways could they be harmed?
A) Someone parties who can be harmed by the theft other then O'Conner is
the prospective buyers and the tenants. Since the balance sheets indicates
the health of the business, a prospective buyer might buy the company
under the discretion that the company is doing well off, when in fact, there is
unlawful procedures taking place. The tenants can be harmed because
payments they made to the manager where not recorded, thus maybe cause
the tenants to be evicted (oh the poor tenants!).
2. Discuss the role accounting plays in this situation.
A) Accounting plays a role in this because, the property manager in Lasing is
breaking rules by committing embezzlement. Embezzlement is the act of
wrongfully appropriating funds that have been entrusted into your care but
which are owned by someone else. The act of embezzlement causes
hindrance for a company and future buyers of companies. Also the act of
understating the bank reconciliation.

4. Requirements
1. Is McMurphy's practice of smoothing income ethical? Why or why not?
A) The act of income smoothing by McMurphy is unethical. Since the act of
overestimating and underestimate takes away from the integrity and
accuracy of the figures, this act is unethical. In fact, if this company were
subject to Sarbanes Oxley, this overestimating and underestimating may be
5. Requirements
1. Explain the tax advantage of allocating too much to the building and too
little to the land.
A) Since the building is depreciated and the land isn't, allocating a larger cost
to the building would create more depreciation expense. More expense
means less taxes.

2. Was Western's allocation ethical? If so, state why. If not, why not? Identify
who was harmed.
A) It is not ethical. The conservatism principle of accounting states that when
choosing between two solutions, the one that will be least likely to overstate
assets and income should be picked. The main entity that would be harmed
is the government for taxation purposes.

6. Requirement
1. When a business abuses this issue, how is the independent contractor
A) The independent contractor is hurt because the company does not have
to write him up as regular worker neglecting his benefits (social security,
unemployment ect). Also the independent contractor must bear the grunt of
all the taxes, which take away from his income.
2. If a business takes an aggressive position - that is, interprets the law in a
very slanted way - is there an ethical issue involved? who's hurt?
A) Yes an ethical issue is involved because the company would take
advantage of workers by hiring them as independent contractors rather than
regular employees. The Independent contractor would definitely suffer in the
long run due to the taxes and the benefit they will lack if the contract
happens to broken.
7. Requirement
1. The board members call you, their trusted CPA, to advise them on how
Raffie's Kids should report the mortgage on its balance sheet. Provide your
recommendation and discuss the reason for your recommendation.
A)When reporting mortgage on a balance sheet, liabilities should be separate
from long term liabilities. Usually a portion of the mortgage will show up on
the long term, due to the accrued interest rate total. This would allocate and
designate the mortgage efficiently so it could be paid in time.

8. Requirements

1. What is unethical about this situation

A) This situation is unethical because Sewell is appraising his own value at
500,000 which could be an overestimate, thus creating an undercut and
giving him potential profit.
2. Who can be harmed? How can they be harmed? What role does
accounting play?
A) The investors willing to invest in stock are harmed, because they might
not be able to sell the stock at the required place, in turn losing their original
amount and ending up with a deficit. Accounting plays an integral because
Sewell is using unethical manner, to gain profit from a debunked stock