discouraging end ofyear games A software development finn is funded by a venture capital group and a large pension fund. These investors dosel y monitor the finn and expect it to meet its sales and ineome projeetions.

Nearing the end of a reeent year, it has beeome apparent the announeed ineome goal is in jeopardy. The finn is eontemplating (i) laying off market research personnel; (ii) requesting that an important subeontractor delay a progress billing until after the dose of the year; (iii) delaying some scheduled maintenanee and eapitalizing the eost of other maintenanee; and (iv) asking severallarge eustomers to aeeept early shipment on orders they have plaeed.

a] How eould eaeh of these actions affeet the end-of-year finaneial statements?

b] Conversely, suppose near the end of the year it beeomes apparent that the announeed ineome goal has already been met. The finn might now engage in various acts that will provide a eushion for the following year. Describe several such aets that the finn might eontemplate.

e] What might the outside investors do to reduee the temptation to pursue these types of actions?

AppendixLO1