Flare, Inc., which has a December 31 year end, designs and sells fashions for young professional women. Sandra Mason, president of the company, fears that the forecasted 20x7 profitability goals will not be reached. She is pleased when Flare receives a large order on December 30 from The Executive Woman, a retail chain of upscale stores for businesswomen. Mason immediately directs the controller to record the sale, which represents 13 percent of Flare’s annual sales. At the same time, she directs the inventory control department not to separate the goods for shipment until after January 1. Separated goods are not included in inventory because they have been sold.

On December 31, the company’s auditors arrive to observe the year-end taking of the physical inventory under the periodic inventory system. How will Sandra Mason’s actions affect Flare’s 20x7 profitability? How will they affect Flare’s 20x8 profitability? Were Mason’s actions ethical? Why or why not?

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