Question
Maria Dees is the new controller for Harmony Tennis, a designer and manufacturer of tennis attire. Shortly before the Dec 31st fiscal year end, Harmony
Maria Dees is the new controller for Harmony Tennis, a designer and manufacturer of tennis attire. Shortly before the Dec 31st fiscal year end, Harmony Sapp (the company president) asks Dees how things look for the year end numbers. Sapp is not happy to learn that earnings growth may be below 10% for the first time in the company's 5 year history. Sapp explains that financial analysts have again predicted a 12% earnings growth for the company and that she does not intend to disappoint them. She suggests that Dees talk to the assistant controller who can explain how the previous controller dealt with the situation.
The assistant controller suggests the following strategies
1. postpone planned dverstsing expenditures from Dec to Jan
2. DO not record sales returns and allowances in the basis that they are individually immaterial
3. persuade retail customers to accelerate Jan orders to Dec
4. Reduce allowance for bad debts (and bad debts expense)
5. Harmony Tennis ship finished goods to public warehouses across the country for temporary storage until it receives orders from customers. As Harmony Tennis receives orders, it directs the warehouse to ship goods to nearby customers. The assistant controller suggests recording goods sent to the public warehouse as sales.
Which of the suggested strategies are inconsistent with IMA standards? What should Dees do if Sapp insists she follow all these suggestions?
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