The net income of Simon and Hobbs, a department store, decreased sharply during 2000. Carol Simon, owner of the store, anticipates the need for a bank loan in 2001. Late in 2000, Simon instructs the store's accountant to record a $10,000 sale of furniture to the Simon family, even though the goods will not be shipped from the manufacturer until January 2001. Simon also tells the accountant not to make the following December 31, 2000 adjusting entries:

Salaries owed to employees: $900
Prepaid insurance that has expired: $400
Why is Simon taking this action? Is her action ethical? Give your reason, identifying the parties helped and the parties harmed by Simon's action

You need to make an attempt to answer this yourself first. Why do you think they're doing this, and what are your reasons. If you come up with something, then we can help you further. We can't just answer your homework for you.

Think from the point of view of what entries should be made, what accounts that would affect, and then how that translates into the financial statements. (e.g. something affecting an expense account will in the end affect the Income Statement since expenses end up on the Income Statement.)

Carol is being unethical, attempting tochange the books so that her sales and assets appear to be higher than they actually are, and her liabilities appear lower than they actually are. This is no doubt being done to 'fool' the bank that will be looking at her most recent financial information in order to evaluate her business for a loan