A small neighborhood barber shop that is operated by its owner would likely be organized as a

GAAP & Ethics

When it comes to the scheme that Mr. Blowhard has pulled on his own company

all he has done is hurt his actual earnings. He has made the profits seem quiet high but

this is a false pretense to true earnings. When and if the company sells the purchaser will

then have to rebuy the all the lines that were recently sold in order to expand properly.

This will in the end cause a huge deficit to the new company that was truly unneeded.

With a huge deficit in expenses right off the bat there may the chance of collapsing the

business from shortly after the purchase. The ethics that Mr. Blowhard used in this were

wrong because he only temporarily improved his business and is leaving the issue for a

later owner to fix if he plans to expand and make successful profits. It will for sure make

his financial statements unbalanced for the assets will become heavy once the assets are

received leaving the expenses to be very light in weight.

The ways he could adjust his improper actions is by using the cash basis

accounting method. This would allow for things not to fully match up and no questions to

really be asked. He could also use various inventory cost flow methods such as FIFO,

LIFO and weighted averages. This would allow for the best option to used in order to

benefit the Communication business the best.

In the end Mr, Blowhard’s scheme could be covered up in many ways, but in the

end he is really hurting his business and scamming someone into buying something that

isn’t true in its financial records.

Test Bank for Financial Accounting, Ninth Edition85.John and Sam met at law school and decide to start a small law practice after graduation.They agree to split revenues and expenses evenly. The most common form of businessorganization for a business such as this would be aDifficulty: EasyTOT: 1.0 min.AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPAFN: Reporting