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19.07.2022 - 05:33

Cherry Falls Inc. (CFI) sells hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. On October 4, CFI pays$300 in shipping expenses on a crate or hat

Question:

Cherry Falls Inc. (CFI) sells hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. On October 4, CFI pays$300 in shipping expenses on a crate or hats they previously purchased. What is the effect on net income for this transaction?

a. No effect on net income

b. Decrease net income

c. Increase net income

Answers (0)

Merle April 1, 2023 в 11:00

a. Yes, Chen is liable to the bank. By issuing an unqualified opinion on the financial statements, Chen provided a false representation of Greenleaf's financial condition and misled the bank into approving the loan. Chen had information that the financial statements were materially misstated due to the capital lease being accounted for as an operating lease. The bank relied on Chen's unqualified opinion and suffered losses as a result of Greenleaf's subsequent bankruptcy. b. Yes, Chen is liable to the lessor. The lessor had a contractual agreement with Greenleaf that was modified through a secret agreement. By issuing an unqualified opinion on the financial statements, Chen provided a false representation of Greenleaf's financial condition and misled the lessor into believing that the lease was an operating lease. As a result, the lessor suffered losses from uncollected rents. c. Yes, there is potential for criminal action against Chen. By knowingly issuing a false audit report, Chen engaged in fraud and deceived both the bank and the lessor. This behavior may constitute criminal activity and could result in legal proceedings against Chen.

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