You are an accountant at Evil Corporation. Your company is working to expand operations to another state. The company asked you to prepare financial statements to present to the bank to obtain financing. The income statement you prepared shows a loss of $2,000 for the current fiscal period. When you presented the figures to your immediate supervisor, Mr. Lucifer Strong, he informs you that these figures will not fly. He tells you to go back to the income statement and include a $10,000 customer payment that has not yet been received. This customer has recently filed bankruptcy and it is not likely that Evil Corporation will ever receive the funds.

1. What would you do and why? Carefully explain your answer.

2. Assuming that you do change the income statement, will the balance sheet be incorrect? What about the statement of cash flows? Fully explain.

3. What are the consequences of your actions if you choose to provide fraudulent financial statements to the bank? How could the bank learn the truth?