The net income of Antiques Plus decreased sharply during 2014. Mariah Ciccone, owner of the store, anticipates the need for a bank loan in 2015. Late in 2014, she instructs the accountant to record a $35,000 sale of furniture to the Ciccone family, even though the goods will not be shipped from the manufacturer until January 2015. Ciccone also tells the accountant not to make the following December 31, 2014, adjusting entries:
Salaries owed to employees .................................... $27,000
Prepaid insurance that has expired ............................... 1,500
Required
1. Compute the overall effect of these transactions on the store's reported income for 2014.
2. Why did Ciccone take this action? Is this action ethical? Give your reason, identifying the parties helped and the parties harmed by Ciccone's action.
3. As a personal friend, what advice would you give the accountant?