Acct 3333 Ch 1 in-class solutions Fall 2010

Acct 3333 Ch 1 - 124 1 2 3 4 5 6(15min Costbenefitapproach

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Chapter 1 -  In-Class Solutions 1-24 (15 min.) Management accounting guidelines. 1. Cost-benefit approach 2. Behavioural and technical considerations 3. Behavioural and technical considerations 4. Different costs for different purposes 5. Behavioural and technical considerations 6. Cost-benefit approach 1-25 (10-15 min.) Professional ethics and reporting divisional  performance . 1. Stevenson’s ethical responsibilities are well summarized in the SMAC’s “Code of Professional  Ethics” (Exhibit 1-7 of text). The key area related to Stevenson’s current dilemma is integrity. Stevenson should refuse to  book the $200,000 of sales until the goods are shipped. Both financial accounting and management  accounting principles maintain that sales are not complete until the title is transferred to the buyer. 2. Stevenson should refuse to follow Jonas’ orders. If Jonas persists, the incident should be  reported to the corporate controller. Support for line management should be wholehearted,  but it should not require unethical conduct. 1-33 (30-40 min.) Governance and earnings management. 1.  The possible motivations for Harvest Day Corporation’s CEO to “manage” earnings include (a) Manage the stock price. Harvest Day’s CEO wants to meet the forecasted earnings number of  $1.34 per share because the CEO believes that the stock price will drop if actual earnings fall  short of the forecast.  (b)  Job security. The CEO may be concerned that the Board of Directors may have a poor view of  him if he delivers “unwelcome surprises.” Depending on how much the stock falls, they may  even consider dismissing him.
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(c)   Management incentives. The bonuses of top management and the CEO may be based on  earnings. If earnings decrease, smaller or no bonuses may be paid. If top management and the  CEO have stock options, the value of these options will be adversely affected if the stock price  falls. 2. Several of the “end-of-year actions” clearly are in conflict with these requirements and should be  viewed as unacceptable: (a) Subscriptions cancelled in December should be recorded in December itself and not delayed  until January. (c)
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This note was uploaded on 01/14/2011 for the course ACCT 3333 taught by Professor J.d during the Spring '08 term at Saint Mary's University Texas.

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Acct 3333 Ch 1 - 124 1 2 3 4 5 6(15min Costbenefitapproach

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