Ethical Issue The net income of Steinbach & Sons, a department store, decreased sharply during 2011

Ethical Issue

The net income of Steinbach & Sons, a department store, decreased sharply during 2011. Mort Steinbach, manager of the store, anticipates the need for a bank loan in 2012. Late in 2011, Steinbach instructs the store's accountant to record a $2,000 sale of furniture to the Steinbach family, even though the goods will not be shipped from the manufacturer until January 2012. Steinbach also tells the accountant not to make the following December 31, 2011, adjusting entries:

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

1. Compute the overall effects of these transactions on the store's reported income for 2011.
2. Why is Steinbach taking this action? Is his action ethical? Give reason, identifying the parties helped and the parties harmed by Steinbach's action. (Challenge)
3. As a personal friend, what advice would you give the accountant? (Challenge)