Prepare a written memo to Baku and Hanson describing the advantages and disadvantages of e organizational form. Also, from the limited information provided, recommend the organizational f you think they should use ATC 8-5 Ethical Dilemma Bad news versus very bad news Louise Stinson, the chief financial officer of Bostonian Corporation, was on her way to the presi dent's office. She was carrying the latest round of bad news. There would be no executive bonuses this year. Corporate profits were down. Indeed, if the latest projections held true, the company would report a small loss on the year-end income statement. Executive bonuses were tied to corporate prof- its. The executive compensation plan provided for 10 percent of net earnings to be set aside for bo- nuses. No profits meant no bonuses. While things looked bleak, Stinson had a plan that might help soften the blow. After informing the company president of the earnings forecast, Stinson made the following sug gestion: Because the company was going to report a loss anyway, why not report a big loss? She rea soned that the directors and stockholders would cot be much more angry if the company reported a large loss than if it reported a small one. down in the current year. This would iner ose sev eral questionable assets that could be writtern rrent year's loss but would reduce expenses in subsequent accounting periods. For example, the cenipany was carrying damaged inventory that was estimated to have a value of $2,500,000. If this estimate were revised to $500,000, the company would have to recognize a $2,000,000 loss in the current year. However, next year when the goods were sold, the expense for cost of goods sold would be $2,000,000 less and profits would be higher by that amount. Although the directors would be angry this year, they would certainly be happy next year The strategy would also have the benefit of adding $200,000 to next year's executive bonus pool Prepare a written memo to Baku and Hanson describing the advantages and disadvantages of e organizational form. Also, from the limited information provided, recommend the organizational f you think they should use ATC 8-5 Ethical Dilemma Bad news versus very bad news Louise Stinson, the chief financial officer of Bostonian Corporation, was on her way to the presi dent's office. She was carrying the latest round of bad news. There would be no executive bonuses this year. Corporate profits were down. Indeed, if the latest projections held true, the company would report a small loss on the year-end income statement. Executive bonuses were tied to corporate prof- its. The executive compensation plan provided for 10 percent of net earnings to be set aside for bo- nuses. No profits meant no bonuses. While things looked bleak, Stinson had a plan that might help soften the blow. After informing the company president of the earnings forecast, Stinson made the following sug gestion: Because the company was going to report a loss anyway, why not report a big loss? She rea soned that the directors and stockholders would cot be much more angry if the company reported a large loss than if it reported a small one. down in the current year. This would iner ose sev eral questionable assets that could be writtern rrent year's loss but would reduce expenses in subsequent accounting periods. For example, the cenipany was carrying damaged inventory that was estimated to have a value of $2,500,000. If this estimate were revised to $500,000, the company would have to recognize a $2,000,000 loss in the current year. However, next year when the goods were sold, the expense for cost of goods sold would be $2,000,000 less and profits would be higher by that amount. Although the directors would be angry this year, they would certainly be happy next year The strategy would also have the benefit of adding $200,000 to next year's executive bonus pool