Question

Chris Hernandez is in the process of negotiating a loan from the bank. The bank has requested that he prepare current financial statements. When deciding on the required allowance for doubtful accounts, Chris intentionally ignored two accounts composing 20% of the receivables balance. Chris has:

Select one:

a. Acted as a moral businessman

b. Failed to act in an ethical manner

c. Followed proper accounting principles

d. Made a decision that will have minimal consequences if the bank finds out

Answer 1

Solution:

Chris Hernandez is in the process of negotiating a loan from the bank. The bank has requested that he prepare current financial statements. When deciding on the required allowance for doubtful accounts, Chris intentionally ignored two accounts composing 20% of the receivables balance. Chris has "Failed to act in an ethical manner" as he intentionally ignored two accounts in computation of allowance for doubtful accounts to show better picture of the financial statements.

Hence option b is correct.