Anton Blair is the manager of a medium-size company. A few years ago, he persuaded the owner to base part of his compensation on the net income earned each year . Each December, he estimates the year-end financial figures in anticipation of the bonus he will receive. If the bonus isn't as large as he'd like, Anton offers several recommendations to Accounting for year-end adjustments. One of his favorite recommendations is for the controller to reduce the estimate of doubtful accounts.

1. What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet?

2. Do you believe Blair's recommendation to adjust the allowance for doubtful accounts is within his rights as a manager or, is this action an ethics violation?