Question
Peter Parker was the accounting manager at Zelco, a tire manufacturer, and he played golf with Bruce Banner, the CEO, who was something of a
Peter Parker was the accounting manager at Zelco, a tire manufacturer, and he played golf with Bruce Banner, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by the end of the year. Parker was eager to get into Banner's elite social circle; he boasted to Banner 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, Parker changed the debits from "rent expense" to "prepaid rent" on several entries. Later, Banner got his bonus, and the deviations were never discovered.
- How did the change in journal entries affect the net income of the company at year-end?
- Who gained and who lost as a result of these actions?
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