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Capstone 51
Capstone 51
to satisfy investors, creditors, stockholders, and internal company managers. All of these financial
statement users are clamoring for higher profits and more net assets (also known as equity). If at some
point, you suddenly found yourself not meeting the internal and external earnings and equity targets
that these parties expect, you would probably search for some way to make the financial statements
look better. What if your boss, the CEO, suggested that maybe you should make just one simple journal
entry to record all the goods that your company is holding on consignment, as if that significant amount
of goods were owned by your company? She might say that this action on your part would fix a lot of
problems at once, since adding the consigned goods to merchandise inventory would simultaneously
increase net assets on the balance sheet and increase net income on the income statement (since it
would decrease cost of goods sold). How would you respond to this request?
Write a memo, detailing your willingness or not to embrace this suggestion, giving reasons behind your
decision. Remember to exercise diplomacy, even if you must dissent from the opinion of a supervisor.
Note that the challenge of the assignment is to keep your integrity intact while also keeping your job, if
possible.