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You have recently been hired as the assistant controller for Stub Industries, a large publicly held manufacturing company. Your immediate superior is the controller who,

You have recently been hired as the assistant controller for Stub Industries, a large publicly held manufacturing company. Your immediate superior is the controller who, in turn, is responsible to the VP of Finance.

The controller has assigned you the task of preparing the year-end adjusting entries. In the receivable area, you have prepared an aging of accounts receivable and have applied historical percentages to the balances of each of the age categories. The analysis indicates that an appropriate balance for the allowance of uncollectible accounts s $180,000. The existing balance in the allowance account prior to any adjusting entry is $20,000 credit balance.

After showing your analysis to the controller, he tells you to change the aging category of a large account from over 120 days to current status and to prepare a new invoice to the customer with the revised date that agrees with the new aging category. This will change the required allowance for uncollectible accounts from $180,000 to $135,000. Tactfully, you ask the controller for an explanation for the change and he tells you we need the extra income; the bottom line is too low.

What is the effect of income before taxes of the change requested by the controller? Discuss the ethical dilemma you face. Discuss options? Discuss responsibilities and consequences of any actions you might take.

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