Melanie Sanders and Joyce ODell were department heads at Hobgoods Toy and Hobby Store. They had been friends for a long time. Mr. Hobgood, the owner of the store, let the department heads make all decisions relating to the stores operations. During the summer the hobby department usually had a higher gross profit, but during the holidays the toy department usually caught up. This year the toy department wasnt doing well at all, mainly because a new discount toy store had opened less than a mile away. In early December, Melanie, the toy department manager, asked Joyce if she would mind charging all the remaining years advertising and shipping expenses to the hobby department. Melanie went on to explain that she was afraid Mr. Hobgood would get upset if he found out the toy department wasnt doing well during the last quarter. She said she had a plan for next year to earn more revenue but was vague on what it involved. Joyce knew the hobby departments year-to-date earnings were above average but she felt uncomfortable with what Melanie had asked her to do.

Discuss the impact on the financial statements if Joyce decides to let Melanie charge all advertising and shipping expenses to the hobby department in December., include both the short- and long-run implications of Melanies idea.