(Warranties) The Ray Company, owner of Bleacher Mall, charges Creighton Clothing Store a rental fee of $600 per month plus 5% of yearly profits over $500,000. Harry Creighton, the owner of the store, directs his accountant, Burt Wilson, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000.

Instructions Answer the following questions.

(a) Should Wilson follow his boss’s directive?

(b) Who is harmed if the estimates are increased?

(c) Is Creighton’s directive ethical?