The net income of Steinbeck and Sons, a landscaping company, decreased sharply during 2016. Mort Steinbeck, owner ,and manager of the company anticipates the need for a bank loan in 2017, Late in 2016 Steinbeck instructs the company’s accountant to record 2000. dollars service revenue for landscape services for the Steinbeck family, even though the services will not be performed until Jan. 2017. Steinbeck also tells the accountant not to make the following December 31, 2016, adjusting entries. Salaries owed to employees 900

prepaid insurance that has expired 400

1. Compute the overall effects of these transactions on the company’s reported net income for 2016. 

2. Why is Steinbeck taking this action? Is his action ethical? Give your reason, identifying the parties helped and the parties harmed by Steinbeck’s action.

3. As a personal friend what advice would you give the accountant?