Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

BYP8-8 As its year-end approaches, it appears that Ortiz Corporation's net income will increase 10% this year. The president of Ortiz Corporation, nervous that the

image text in transcribed

BYP8-8

As its year-end approaches, it appears that Ortiz Corporation's 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 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 Corporation in future years. The controller of Ortiz Corporation believes that the company's yearly allowance for doubtful accounts should be 2% of receivables.

Instructions

(a)

Who are the stakeholders 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.

NB: I due on the 10th

500 WORDS.

ONE WORDS CITATED PAGE.

ONE SOURCE FRO THE BOOK.

image text in transcribed ETHICS CASE BYP8-8 As its year-end approaches, it appears that Ortiz Corporation's 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 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 Corporation in future years. The controller of Ortiz Corporation believes that the company's yearly allowance for doubtful accounts should be 2% of receivables. Instructions (a) Who are the stakeholders 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. NB: I due on the 10th 500 WORDS. ONE WORDS CITATED PAGE. ONE SOURCE FRO THE BOOK

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management A Risk Management Approach

Authors: Anthony Saunders, Marcia Millon Cornett

9th edition

1259717771, 1259717772, 9781260048186, 1260048187, 978-1259717772

More Books

Students also viewed these Finance questions