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Chapter 16: Q16-2SE-a (page 885)

Identifying ethical standards
The Institute of Management Accountants’ Statement of Ethical Professional Practice requires managerial accountants to meet standards regarding competence, confidentiality, integrity, and credibility. Consider the following situations. Which standard(s) is(are) violated in each situation?
a) You tell your brother that your company will report earnings significantly above financial analysts’ estimates.

Short Answer

Expert verified

The ethical standard violated, in this case, is Confidentiality.

Step by step solution

01

Definition of a financial analyst

The financial analyst refers to the person whose job is to assess the financial position of the business or the assets.

02

Identification of violated ethical standards

The correct option is Confidentiality standards.

In this case, the information related to the earnings is shared with the brother before it is publicly announced violated the standard of integrity. The company’s financial information should be kept secret before they publish it.

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Most popular questions from this chapter

Applying ethical standards

Ava Borzi is the new controller for Halo Software, Inc. which develops and sells education software. Shortly before the December 31 fiscal year-end, Jeremy Busch, the company president, asks Borzi how things look for the year-end numbers. He is not happy to learn that earnings growth may be below 9% for the first time in the company’s five-year history. Busch explains that financial analysts have again predicted a 9% earnings growth for the company and that he does not intend to disappoint them. He suggests that Borzi talk to the assistant controller, who can explain how the previous controller dealt with such situations. The assistant controller suggests the following strategies:

a. Persuade suppliers to postpone billing \(18,000 in invoices until January 1.

b. Record as sales \)120,000 in certain software awaiting sale that is held in a public warehouse.

c. Delay the year-end closing a few days into January of the next year so that some of the next year’s sales are included in this year’s sales.

d. Reduce the estimated Bad Debts Expense from 3% of Sales Revenue to 2%, given the company’s continued strong performance.

e. Postpone routine monthly maintenance expenditures from December to January.

Requirements

1. Which of these suggested strategies are inconsistent with IMA standards?

2. How might these inconsistencies affect the company’s creditors and stockholders?

3. What should Borzi do if Busch insists that she follow all of these suggestions?

Question:Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company

Gourmet Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:

Balances: Beginning Ending

Direct Materials \( 13,500 \) 7,500

Work-in-Process Inventory 0 3,500

Finished Goods Inventory 0 5,200

Other information:

Direct materials purchases$ 36,000

Plant janitorial services 700

Sales salaries 6,000

Delivery costs1,300

Net sales revenue 107,000

Utilities for plant 1,300

Rent on plant 17,000

Customer service hotline costs 1,200

Direct labor23,000

Requirements

1. Prepare a schedule of cost of goods manufactured for Gourmet Bones for the year ended December 31, 2018.

2. Prepare an income statement for Gourmet Bones for the year ended December 31, 2018.

3. How does the format of the income statement for Gourmet Bones differ from the income statement of a merchandiser?

4. Gourmet Bones manufactured 17,900 units of its product in 2018. Compute the company’s unit product cost for the year, rounded to the nearest cent.

Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company

Certain item descriptions and amounts are missing from the monthly schedule of cost of goods manufactured and income statement of Elly Manufacturing Company. Fill in the blanks with the missing words, and replace the Xs with the correct amounts.

Beginning Direct Ending Direct Direct Manufacturing Overhead Total Total Ending Direct Materials Beginning Direct Materials Purchases of Direct Materials \( 27,000 \) X \( X X X (25,000) 180,000 44,000 \) X 56,000 84,000 (20,000) ELLY MANUFACTURING COMPANY

Net Sales Revenue Cost of Goods Sold Total Income Cost of Goods Sold: Gross Profit Expenses: Selling Expenses Administrative Expenses Cost of Goods Ending Beginning \( X \) X 232,000 258,000 X 160,000 98,000 $ 110,000 X X X E

What are product costs?

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

8. Property taxes on the factory

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