INTERMEDIATE ACCOUNTING 301

ETHICS CASE 1

Analyze the following ethics case using the Ethical Decision Making Model shown below.

Ethical decision making is a process, and it is important that you go through each step of the process before making a recommendation related to the ethical dilemma.

Assume that you are the controller of the company and that you have been asked to advise the companys management and Board of Directors.

Specifically address each of the steps in the Ethical Decision Making Model. Clearly state the major ethical issue (dilemma), emphasizing the ethics of the dilemma. Specifically identify each alternative. Remember that you cannot have just one alternative. If it is really a dilemma you must have at least two alternatives. Focus on the main alternatives (two or three at most). You must provide an analysis of each alternative identifying which stakeholders are benefited and which stakeholders are harmed. Make your recommendation based upon your analysis.

Case:

You are the Controller of the Big Bucks Corporation. Big Bucks needs to obtain a loan in order to finance the remodeling of the production facilities. They are at a competitive disadvantage with the current facilities. A loan agreement that Big Bucks currently has with Dollar Bank requires them to maintain a certain profit margin and current ratio. This years income, profit margin, and current ratio are not favorable. Big Bucks has been using the LIFO method to value its inventory. Chris Smart, the CEO of Big Bucks, has asked you to change the inventory valuation method from LIFO to FIFO which will cause income and the related ratios to increase. With this change Big Bucks can meet the requirements of the loan agreement and qualify for the additional loan.

Evaluate the case using the following ethical decision making model.

You can type directly on this word document, completing each step of the model. You do not have to formally write this case analysis. Just enter bulleted responses for each of the steps below. You will be given feedback that you will be able to use for the final ethics case.

What are the relevant facts?

What is the main ethical issue? (State this as an ethical dilemma.)

What stakeholders may be benefited or harmed?

What are my specific responsibilities and obligations?

Identify the alternatives? (Clearly state)

What are the ethics of the alternatives? What is the effect of each alternative on the various stakeholders? How are they harmed or benefited? Consider that the interests of the various stakeholders may be in conflict.

What action should be taken? Select the best or most ethical alternative, considering all the circumstances and the consequences.

INTERMEDIATE ACCOUNTING 301 ETHICS CASE 1 Analyze the following ethics case using the Ethical Decision Making Model shown below. Ethical decision making is a process, and it is important that you go through each step of the process before making a recommendation related to the ethical dilemma. Assume that you are the controller of the company and that you have been asked to advise the company's management and Board of Directors. Specifically address each of the steps in the Ethical Decision Making Model. Clearly state the major ethical issue (dilemma), emphasizing the ethics of the dilemma. Specifically identify each alternative. Remember that you cannot have just one alternative. If it is really a dilemma you must have at least two alternatives. Focus on the main alternatives (two or three at most). You must provide an analysis of each alternative identifying which stakeholders are benefited and which stakeholders are harmed. Make your recommendation based upon your analysis. Case: You are the Controller of the Big Bucks Corporation. Big Bucks needs to obtain a loan in order to finance the remodeling of the production facilities. They are at a competitive disadvantage with the current facilities. A loan agreement that Big Bucks currently has with Dollar Bank requires them to maintain a certain profit margin and current ratio. This year's income, profit margin, and current ratio are not favorable. Big Bucks has been using the LIFO method to value its inventory. Chris Smart, the CEO of Big Bucks, has asked you to change the inventory valuation method from LIFO to FIFO which will cause income and the related ratios to increase. With this change Big Bucks can meet the requirements of the loan agreement and qualify for the additional loan. Evaluate the case using the following ethical decision making model. You can type directly on this word document, completing each step of the model. You do not have to formally write this case analysis. Just enter bulleted responses for each of the steps below. You will be given feedback that you will be able to use for the final ethics case. 1. What are the relevant facts? 2. What is the main ethical issue? (State this as an ethical dilemma.) 3. What stakeholders may be benefited or harmed? 4. What are my specific responsibilities and obligations? 5. Identify the alternatives? (Clearly state) 6. What are the ethics of the alternatives? What is the effect of each alternative on the various stakeholders? How are they harmed or benefited? Consider that the interests of the various stakeholders may be in conflict. 7. What action should be taken? Select the best or most ethical alternative, considering all the circumstances and the consequences