On December 15, 2019, Juan Gonzalez, controller of Keizer Industries, was reviewing several reports on production costs for 2019. An amount in these reports caught his attention and worried him: the cost of advertising.

During October, the company began a costly advertising campaign to sell some of its lower-motion products. It is still too early to know if the advertising campaign was successful. There has been a lot of internal debate about how to report advertising costs.

1. Some argue that advertising costs should be reported as a cost of production, as are direct materials and direct labor. Therefore, this cost should be accounted for as manufacturing overhead and reported as part of the inventory costs until they are sold. 2. Others disagreed and believe that this cost should be reported as an expense of the current period, so as not to overestimate net income. 3. Others argue that it should be reported as prepaid advertising and reported as a current asset. 

The president points out that the company is experiencing financial difficulties and that the option should be chosen that does not affect the profits of the business and facilitates obtaining a loan necessary for next year. At the same time, he prefers an option that attracts less attention from financial analysts and regulators. 

Instructions

Prepare an email to the president of the company, Maria Keizer, where she serves separately and clearly identified each of the following 4 issues: to. Identify and summarize the ethical issue that exists in this situation; b. discuss who are the affected parties in this situation if it is done in a deceptive or incorrect way, and c. describe the treatment you recommend as correct, regardless of the president's message. d. Explain clearly the effect on net income (net income) of your recommendation