Your boss comes to you and asks you to defer recognizing certain expenses in thi

Question

Your boss comes to you and asks you to defer recognizing certain expenses in this period by capitalizing the expenditures as a depreciable asset. It has been rumored that your branch of the company has been doing poorly and is on an internal list for possible closings. A closing of your branch would mean your boss, yourself and 20 others would lose their jobs. However, a good quarter could mean that another branch will be closed instead. You know the expenditure is not an asset.

Requied:

Define the agent(s) and principal(s) in this problem.

Explanation / Answer

The principal would be the employer and the agent would be the employee.

This is because principal is the person who is giving the instructions and in this case it is the employer who is asking for treating certain expenditure as a capital instead of revenue to inflate the profits.

Agent on other hand is the employee to whom the instructions are being passed on.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.