Answer
a.Integrity is the predominant issue in this scenario. Charlie Brown wants to engage in earnings management to conceal the losses the corporation has incurred after selling the equipment. Concealing the information will mislead shareholders who are not privy to the loss.
b.Accounting standards require Charlie to disclose the loss under the “Other Losses and Expenses” section so that it will be considered during the computation of Kelly Corporation’s comprehensive income.
Work Step by Step
a.Integrity is the predominant issue in this scenario. Charlie Brown wants to engage in earnings management to conceal the losses the corporation has incurred after selling the equipment. Concealing the information will mislead shareholders who are not privy to the loss.
b.Accounting standards require Charlie to disclose the loss under the “Other Losses and Expenses” section so that it will be considered during the computation of Kelly Corporation’s comprehensive income.
