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Part B Thomas Lee is a branch accountant in a multinational company HKCP Group ("the...

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Accounting

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Part B Thomas Lee is a branch accountant in a multinational company HKCP Group ("the Group") responsible for purchasing supplies from a developing country. Thomas is authorized to enter into contracts up to HK$10,000,000 for any single transaction. Demand in the home market is growing and Head Office is pressing for an increase in supplies. However, the supplies must be sourced at below-market prices. If not, the Group will be losing out in competition and his year-end bonus will be gone. A new government official in the developing country says that Thomas needs an export permit from his department and that he needs a payment to be made to his sister-in-law for consulting services if the permit is to be granted. Thomas quickly checks alternative sources and finds that the normal price combined with the extra "facilitation fee" is still much cheaper than the alternative sources of supply. Thomas faces two problems, namely, whether to pay the facilitation fee and, if so, how to record it in the accounts so it is not obvious what it is. Required: Discuss the problems and suggestions. Please limit your answers to 250 words. (12 marks)

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