Mr. Zai was the accounting manager at Scobi, a tire manufacturer, and he played golf with Mr. Naj, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Scobi increased net income by year-end. Mr. Zai was eager to get into Mr. Najs elite social circle; he boasted to Mr. Naj that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Mr. Zai changed the debits from rent expense to prepaid rent on several entries. Later, Mr. Naj got his bonus, and the deviations were never discovered.

Required:

How did the change in the journal entries affect the net income of the company at year-end?

Who gained and who lost as a result of these actions?