Ethics in financial reporting is critical to the reliability of financial statements. Corporate Managers are under enormous pressure to provide high earnings and dividend amounts. After reading the Ethics Case on page 664 of your text discuss the following:
Critical Thinking
Decision Making Across the OrganizationBYP14-4
The stockholders equity accounts of Fernandez, Inc., at January 1, 2012, are as follows.
| Preferred Stock, no par, 4,000 shares issued | $400,000 |
| Common Stock, no par, 140,000 shares issued | 700,000 |
| Retained Earnings | 500,000 |
During 2012, the company had the following transactions and events.
| July | 1 | Declared a $0.50 cash dividend on common stock. |
| Aug. | 1 | Discovered a $72,000 overstatement of 2011 depreciation expense. (Ignore income taxes.) |
| Sept. | 1 | Paid the cash dividend declared on July 1. |
| Dec. | 1 | Declared a 10% stock dividend on common stock when the market value of the stock was |
| $12 per share. | ||
| 15 | Declared a $9 per share cash dividend on preferred stock, payable January 31, 2013. | |
| 31 | Determined that net income for the year was $320,000. |
Instructions
With the class divided into groups, answer the following questions.
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