Question

On January 20, 2017, Tamira Nelson, the accountant for Picton Enterprises, is feeling pressure

to complete the annual financial statements. The company president has said he needs up-to-date financialstatements to share with the bank on January 21 at a dinner meeting that has been called to discussPicton’s obtaining loan financing for a special building project. Tamira knows that she will not be able togather all the needed information in the next 24 hours to prepare the entire set of adjusting entries. Thoseentries must be posted before the financial statements accurately portray the company’s performance andfinancial position for the fiscal period ended December 31, 2016.

Tamira ultimately decides to estimateseveral expense accruals at the last minute. When deciding on estimates for the expenses, she uses lowestimates because she does not want to make the financial statements look worse than they are. Tamirafinishes the financial statements before the deadline and gives them to the president without mentioningthat several account balances are estimates that she provided.

Required

1. Identify several courses of action that Tamira could have taken instead of the one she took.

2. If you were in Tamira’s situation, what would you have done? Briefly justify your response

Short answer

Tamira should consult with the president.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of financial statements

These are the records of the financial activities of the company.

Two possible ways to deal with this problem

1. In the first way, Tamira should talk to the president about the current situation, and she requests the president to postpone the meeting.
2. In a second way, Tamira should adopt GAAP rules and prepare to adjust entries.