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 discuss .Picton’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

Use accrual basis of accounting.

Step-by-step solution

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

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

Tamira’s situation

Tamira should use the accrual basis of accounting and prepare to adjust entries. Tamira tries to collect the all the information which are available and make the adjustment for the same on the basis of accrual accounting. Do not alter or change the financial statement on estimation because this lead to incorrect financial information’s.