On January 20,2011, the accountant for a corporation, is feeling pressure to com
ID: 2386845 • Letter: O
Question
On January 20,2011, the accountant for a corporation, is feeling pressure to complete the financial statements. The company president has said he needs current financial statements to share with the bank on January 21 at a meeting to discuss the corporation obtaining loan financing for a special building project. The accountant knows that she will not be able to gather all the needed information in the next 24 hours to prepare the entire set of adjusting entries. Those entries must be posted before the financial statements accurately portray the company's performance and financial position for the fiscal period ended Dec. 31, 2010. The accountant decides to estimate several expense accruals at the last minute. She used low estimates because she does not want to make the financial statements look worse than they are. She finishes the statements before the deadline and gives them to the president without mentioning that several account balances are estimates that she provided.Required: Identify several courses of action that Tamira could have taken instead of the one she took.
Explanation / Answer
1. Because of the reliance people place on financial statements and the importance of those statements to estimating profits and saving costs, Tamara could have printed a note at the top of the statement that items with an asterisk were estimates and then put asterisks next to those numbers. She could have also written the word or abbreviation estimate or "est." next to the estimated numbers and any other accounts affected by them. She could have written an explanation in a memorandum she attached to the statements which explained the situation. If she could not have used estimates at all, then she should have explained that final numbers are not yet available but that as soon as they are she will provide the required information.
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