This was Joel Craigs first visit to the controllers corner office since being recruited for the senior accountant position in May. Because hed been directed to bring with him his preliminary report on year-end adjustments, Craig presumed hed done something wrong in preparing the report. That he had not was Craigs first surprise. His second surprise was his bosss request to reconsider one of the estimated expenses.

S & G Fasteners was a new company, specializing in plastic industrial fasteners. All products carry a generous long-term warranty against manufacturers defects. Dont you think 4% of sales is a little high for our warranty expense estimate? his boss wondered. After all, were new at this. We have little experience with product introductions. I just got off the phone with Blanchard (the company president). He thinks well have trouble renewing our credit line with the profits were projecting. The pressures on.

Required:

1.Should Craig follow his bosss suggestion?

2.Does revising the warranty estimate pose an ethical dilemma?

3.Who would be affected if the suggestion is followed?