a a Company (TCC) produces and distributes industrial chemicals, TCC's earnings increased sharply in 20x1, and bonuses were me in several years. Bonuses are based in part on the amount by which reported income exceeds budgeted income. vice president of finance, was pleased with TCC's 20x1 earnings and thought that the pressure to show financial results would Lent, told Kern that she saw no reason why the 20x2 bonuses should not be double those of 20xl. As a result, Kem felt pressure to ed budgeted income by an even greater amount. This would assure increased bonuses. with Bill Keller of Pristeel, Inc., a primary vendor of TCC's manufacturing supplies and equipment. Kern and Keller have been close asked Keller to identify all of TCC's purchases of perishable supplies as equipment on Pristeel's sales invoices. The reason Kem ga dent had imposed stringent budget constraints on operating expenses but not on capital expenditures. Kem planned to capitalize d include them with the Equipment account on the balance sheet. In this way Kem could defer the expense recognition for these Fould increase reported earnings, leading to increased bonuses. Keller agreed to do as Kem had asked. alyzing the second quarter financial statements, Gary Wood, TCC's controller, noticed a large decrease in supplies expense from one = Expense account and noticed that only equipment and no supplies had been purchased from Pristeel, a major source for supplies. Wow y brought this to Kern's attention. d Wood of Norths high expectations and of the arrangement made with Keller of Pristeel. Wood told Kem that his action was an improp plies purchased from Pristeel. Wood requested that he be allowed to correct the accounts and urged that the arrangement with Pristeel request and told Wood not to become involved in the arrangement with Pristeel. arifying the situation in a confidential discussion with an objective and qualified peer within TCC, Wood arranged to meet with North-T wood disclosed the arrangement Kern had made with Pristeel. Jain why the use of alternative accounting methods to manipulate reported earnings is unethical -ary Wood, TCC's controller, correct in saying that the supplies purchased from Pristeel, Inc. were accounted for improperly Explan your ansa uming that Jim Kern's arrangement with Pristeel, Inc. was in violation of the standards of ethical professional practice for managenal secountar actions of Wood were appropriate or inappropriate. (The guidelines for Resolution of Ethical Conflict are given in Chapter 1) Inntad)