As its year end approaches, it appears that Ortiz Corporations net income will increase 10 this year The president of Ortiz Corporation, nervous that the stockholders might expect the company to sustain this 10 growth rate in net income in future years, suggests that the controller increase the all...

a The stakeholders in this situation are The president of Ortiz Corp The co ...

As its year-end approaches, it appears that Ortiz Corporations net income will increase 10% this year. The

Question:

As its year-end approaches, it appears that Ortiz Corporation’s net income will increase 10% this year. The president of Ortiz nervous that the stockholders might expect the company to sustain this 10% growth rate in net income in future years, suggests that the controller increase the allowance for doubtful accounts to 4% of receivables in order to lower this year’s net income. The president thinks that the lower net income, which reflects a 6% growth rate, will be a more sustainable rate of growth for Ortiz in future years. The controller of Ortiz believes that the company’s yearly allowance for doubtful accounts should be 2% of receivables.

Instructions
(a) Who are the in this case?
(b) Does the president’s request pose an ethical dilemma for the controller?
(c) Should the controller be concerned with Ortiz Corporation’s growth rate in estimating the allowance? Explain your answer.

Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...