You are a CPA and you are the controller for ABC Company Ltd. ABC Company Ltd. is a large multinational corporation. Division A, is the construction arm of the Corporation. Managers of ABC Co. are paid a bonus which can represent a large proportion of their annual earnings. The bonus is paid when the budgeted net income for the financial year is achieved or exceeded.

Divisional Managers meetings are held monthly. With the end of the financial year approaching, there had been discussion of forecast profit for the year, and whether budgeted profit could be achieved. In the prior meeting various actions had been discussed for the Division A. In each case, the amounts involved would have been material in determining whether the division would achieve its budget:

1. Division A is constructing a new building that will serve as the new R&D facility. The cost of new facility is expected to be $100,000,000. The building is expected to have a useful life of 50 years. The company borrowed $45,000,000 for general corporate purposes; the loan is repayable over 20 years. The plan is to capitalize interest on the loan to the cost of the building and amortize the building straight line over the life of the building.
2. The managers propose to base bad debts on accounts receivable instead of credit sales; this action would produce a smaller bad debt expense.
3. Division C has various investments in real estate that have appreciated significantly in value.Due to changes in the company's strategy this real estate is no longer viewedas core assets. Several managers have suggested selling the real estate and realizing the accrued gains.
4. The company shipped a significant amount of inventory to the wrong country. Shipping costs are high and it would be unprofitable to ship the inventory to the correct location. As a result, the inventory will have to be liquidated at 50% of cost or less. The managers have suggested waiting until the following year to liquidate the inventory.

5.

REQUIRED:

Part A

Explain why a CPA is considered a professional by society and describe the fundamental principles (orresponsibilities) of professionalism that society expects from CPA's and all other accountants.

Part B

From the point of view of theManagersof ABC Company Ltd.: Discuss the financial accounting, ethical and motivational issues which you see arise from the above (4) management actions.

Organize your answer in the following format:

Accounting Implication Motivation Ethical Consideration

ITEM