Delay in the Posting of a Journal Entry As assistant controller for a small consulting firm, you are responsible for recording and posting the daily cash receipts and disbursements to the ledger accounts. After you have posted the entries, your boss, the controller, prepares a trial balance and the financial statements. You make the following entries on June 30: June 30 Cash 1,430 1,950 Accounts Receivable Service Revenue 3,380 To record daily cash sales and sales on account. 12,500 22,600 June 30 Advertising Expense Utilities Expense Rent Expense Salary and Wage Expense 24,000 17,400 Cash 76,500 To record daily cash disbursements. The daily cash disbursements are much larger on June 30 than on any other day because many of the company's major bills are paid on the last day of the month. After you have recorded these two transactions and before you have posted them to the ledger accounts, your boss comes to you with the following request: As you are aware, the first half of the year has been a tough one for the consulting industry and for our business particular. With first-half bonuses based on net income, I am wondering whether you or I will get a bonus this time around. However, I have a suggestion that should allow us to receive something for our hard work and at the same time not hurt anyone. Go ahead and post the June 30 cash receipts to the ledger, but don't bother to post that day's cash disbursements. Even though the treasurer writes the checks on the last day of the month and you normally journalize the transaction on the same day, it is silly to bother posting the entry to the ledger since it takes at least a week for the checks to clear the bank. Required: Use the Ethical Decision Framework in Exhibit 1-9 to complete the following requirements: 1. Recognize an ethical dilemma: Why will the controller's request result in an increase in net income? What ethical dilemma(s) do you now face? Entries entered into the journal but not posted to the ledger accounts be reflected in the financial statements. Failure to post the expense/cash disbursement entry will mean that cash will be on the trial balance prepared by the controller, and expenses will be By ignoring a total of $76,500 in various expenses, net income will be by $ The ethical dilemma you face is whether or not 2. Analyze the key elements in the situation: a. Do you agree with the controller that the omission of the journal entry on June 30 "will not hurt anyone"? Who may benefit from the omission of the entry? Who may be harmed? The controller correct in saying that the omission of the expense entry "will not hurt anyone." You and your boss would and stockholders and other outside constituents b. How are they likely to benefit or be harmed? You and the controller would from receiving a bonus on net income that is be required to pay bonuses on a profit level that attained. . The company and its stockholders will because they c. What rights or claims may be violated? The have entrusted, to the of the corporation, responsibility for managing the business in a fair and ethical manner. This particular practice would that trust. d. What specific interests are in conflict? The personal interests of those responsible for are in conflict with those who have a right to fair and accurate presentation in those statements. e. What are your responsibilities and obligations? Your responsibility, and that of the controller, are to present financial statements that give picture of the company's operations. 3. Alternatives and evaluation of the impact of each on those affected: As assistant controller, what are your options in dealing with the ethical dilemma(s) you identified in (1) above? Which provides stockholders and other outsiders with information that is most relevant, most complete, most neutral, and most free from error? Your options are to either ignore the expense journal entry, as requested by your boss, or confront him or her with your concerns. You the controller about this. An income statement that reflect these significant expenses is a definite moral and ethical responsibility to portrayal of the period's net income. 4. Select the best alternative: Among the alternatives, which one would you select?. accounting principles but also the trust shown in both individuals by the stockholders. You shou You should point out to your boss that this suggestion this practice acceptable