Question
Horizon Corporation manufactures personal computers. The company began operations in 2010 and reported profits for the years 2010 through 2015. Due primarily to increased competition
Horizon Corporation manufactures personal computers. The company began operations in 2010 and reported profits for the years 2010 through 2015. Due primarily to increased competition and price slashing in the industry, 2016's income statement reported a loss of $20 million.
Just before the end of the 2017 fiscal year, a memo from the company's chief financial officer to Jim Fielding, the company controller, included the following comments: "If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write down. The resulting loss for 2017 will cause a violation of our debt covenants and force the company into bankruptcy.
I suggest that you ship half of the inventory to J.B. Sales, Inc., In Oklahoma City. I know the companys president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2017 which will boost our loss to a profit. The J.B. Sales will simply return the inventory in 2018 after the financial statements have been issued."
Discuss the ethical dilemma faced by Jim Fielding.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started