One Way Enron Manipulated Its Financial Statements Was to Sell

question 107

Multiple Choice

One way Enron manipulated its financial statements was to sell assets at inflated prices to other firms,while giving a promise to buy back those assets at a later date.The incoming cash was recorded as revenue,but the promise to buy back the assets was not disclosed.Which of the following is one of the ways that such a transaction is deceptive?

• A)The assets should have been listed on the balance sheet as long-term assets.
• B)Cash raised by selling assets should not be recorded as revenue.
• C)The cash raised should have been recorded as short-term loans.
• D)The off balance sheet promises to repurchase assets should have been disclosed in management discussion and analysis (MD&A)or notes to the financial statement.
• E)The promise to buy back the assets should have been listed under accounts payable.

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Definitions:

Thread Pitch

The distance between threads on a screw or bolt, indicating the tightness or coarseness of the thread.

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The specification of a bolt, including diameter, length, and thread pattern, crucial for ensuring compatibility and strength in connections.

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A straight line passing from side to side through the center of a body or figure, especially a circle or sphere.

12-Point Socket

A tool attachment featuring a twelve-pointed, star-shaped opening designed to fit and turn fasteners with various head shapes.