24 Karet Caramels Is a New Candy Company Specializing in Flavored

question 100

Essay

24 Karet Caramels is a new candy company specializing in flavored caramels.The company has advertised widely in catalogues and has received more orders than it can ship on a daily basis.Elizabeth Hutchinson,the president,has instructed the shipping department to work overtime the last two weeks in December to ship as many orders as possible by year-end.Elizabeth says: "It is important for the company to show a profit in the first year of operations to obtain a bank loan to expand.We can recognize revenue on each sale as soon as we ship the caramels to the customers." If we don't have enough inventory to ship all the orders by the end of the year we'll recognize revenue on some of the orders that we are unable to ship until January.We must keep the shareholders happy.a.Consider the environment where this decision is made: Identify the elements of the fraud triangle and evaluate how they are present in this decision.b.Assume that the accountant has four alternatives.Identify the type of fraud (if any)that would be committed with each alternative.1.To work overtime to ship as many orders as possible by the end of year
2.Not to work overtime and to ship only the orders that are possible in a normal work week
3.To recognize revenue on orders that are not shipped at year-end
4.Not to recognize revenue on orders that are not shipped at year-end
Assume that the president of the company plans to issue a press release to the local newspaper describing the success of the company during its first year in business.What advice would you give the president about what she can say in the press release?

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Definitions:

Social Trap

A situation in which the conflicting parties, by each rationally pursuing their self-interest, become caught in mutually destructive behavior.

Mere Exposure Effect

A psychological effect in which people show a preference for items or concepts they recognize simply because they know them.

Two-factor Theory of Emotion

A psychological theory that proposes emotions are based on physiological arousal and cognitive labeling of that arousal.

Aerobic Exercises

Physical exercises that involve or improve oxygen consumption by the body, enhancing cardiovascular conditioning and endurance.