Roy Akins was the accounting manager at Zelco, a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year-end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from “rent expense” to “prepaid rent” on several entries. Later, Hugh got his bonus, and the deviations were never discovered.
For this week’s discussion, please respond to the questions listed below. In addition to your initial response, please be sure to respond to at least two other students’ initial responses, as well.
1. How did the change in the journal entries affect the net income of the company at year-end?
The changing of the journal entries affected the net income by the following:
2. Who gained and who lost as a result of these actions?
This discussion will address the following Module Outcomes:
· Apply the fundamental concepts and principles in accounting. (CO #1)
· Apply the primary financial accounting equation and its components. (CO #1)
· Apply the rules of debit and credit. (CO #1)
Post your primary response. Be sure to review your writing for grammar and spelling before posting.
Read any postings already provided by your instructor and/or fellow students. See the SBT Discussion Rubric for information on how you will be evaluated on this activity.
Remember to read the feedback on your own major postings and reply to it throughout the module.
See the rubric for due dates for posts and responses.
Review the SBT Discussion Rubric located in the “Start Here” section of the course for more information on grading criteria.