On December 10 of the current year, XTREME Sports Inc.receives an advance of $50,000 from a hockey team for 20,000 custom-made shirts with the team's logo, which the team intends to distribute to fans entering a hockey game during the first week in January.XTREME Sports Inc.completes the manufacturing of the shirts on December 30, intending to ship them on December 31 before its accounting period ends.Unfortunately, a snowstorm on December 31 prevented their shipment.XTREME Sports Inc.recorded this transaction as a sale for December, and reduced its inventory accordingly.It set the items aside in its shipping room on December 31 with a clear sign to its own personnel conducting a physical inventory on that date and to its auditors who were observing the count that the items were not to be counted as inventory.These actions

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XTREME Sports Inc.'s actions violate ethical principles as they are misleading its auditors and potential investors who rely on the accuracy of the financial statements. According to both U.S. GAAP and IFRS, goods should not be recognized as sold until they are actually shipped or transferred to the buyer. By recording the transaction as a sale in December and reducing inventory, XTREME Sports Inc. is recognizing revenue prematurely, which can lead to a misstatement of financial statements. The actions taken by the company indicate a lack of integrity and transparency, which is a violation of ethical principles.

On December 10 of the Current Year, XTREME Sports Inc