Why is Simon taking this action? Is her action ethical? Give your reason, identifying the parties helped?

Question

The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though the goods will not be shipped from the manufacturer until January 2001. Simon also tells the accountant not to make the following December 31, 2000 adjusting entries:

Salaries owed to employees: $900
Prepaid insurance that has expired: $400

This is the full Question: Why is Simon taking this action? Is her action ethical? Give your reason, identifying the parties helped and the parties harmed by Simon's action.

Answer 1

Technically by IRS rules this can not be done. The inventory of sale needs to take place in the year recorded. many companies do this an fudge on the last couple of weeks to go for the write off. If she is audited, the IRS will catch this. As far as deliquent salaries, what she did is not ethical but don't believe it breaking the law unless you are a contract employee. Your right is to sue for the monies owed to you with interest, you will have to ask yourself is it worth it.