Chris Wong, controller for Fengshui Corporation, is preparing the company 's income statement for 2020. She recognized that the company generated a considerable amount of loss on the sale of some equipment at the end of 2020. Chris intends to hide this material loss since she feels that will reflect poorly on his and the company. She proposes to postpone recognizing the loss to 2021 so that the losses would not be recorded in the year 2020.

(a) Briefly explain how Chirs's proposal might affect investors understanding of the Fengshui Corporations's financial performance? (5 points)

(b) What are the ethical issues involved, and what should Chris Wong do? (3 points)