Suppose a new management team is in charge of Sunpool, Inc., an appliance man- ufacturer. Assume Sunpool's

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Suppose a new management team is in charge of Sunpool, Inc., an appliance man- ufacturer. Assume Sunpool's new top managers rose through the ranks in the sales and mar- keting departments and have little appreciation for the details of accounting. Consider the fol- lowing conversation between these two managers: Morgan Gummelt, "I want to avoid the hassle of adjusting the books every time we need President: Sarah Mead, Chief Financial Officer: financial statements. Sooner or later we receive cash for all our rev- enues, and we pay cash for all our expenses. I can understand cash transactions, but all these accruals confuse me. If I cannot understand our own accounting, I'm fairly certain the average person who invests in our company cannot understand it either. Let's start record- ing only our cash transactions. I bet it won't make any difference to anyone." 11 "Sounds good to me. This will save me lots of headaches. I'll implement the new policy immediately." Write a business memo to the company president giving your response to the new policy. Identify at least five individual items (such as specific accounts) in the financial statements that will be reported incorrectly. Will outside investors care? Adapt the format of a business memo given with Daily Exercise 3-14.

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Accounting

ISBN: 9780130906991

5th Edition

Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones

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