The management of the well-known multinational corporation, Cola Bonanza Corporation, is infamous for "managing by the numbers". The CEO and the Board of directors set the target profits at the beginning of the year for each of the company's divisions. As long as the targets are met, the CEO generally tends to ignore how division managers achieve them, and in fact, rewards division managers with a year-end bonus for meeting the targets.

Late in the fiscal year, one division manager realized that making that year's profit target was unlikely to happen given the division's current expenses. So, the manager asked the accounting department to change the way it records their supplies expense at the end of the year. The manager asked that the cost of the supplies be added to the inventory account.

• Which Financial Statements are affected, and when?
• How does this request benefit the manager?
• Are the managers actions ethical? Are they legal? Explain your answer. Provide support for your answer.
• How could company policy have influenced the managers behavior?