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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Wholesale Health Supply sells a variety of medical equipment and supplies to retailers. When a new retailer is approved for credit, one of the criteria is that the retailer must have been in business for at least six months. Good Earth Foods placed a large order with Wholesale Health Supply and requested credit terms. Wholesale Health Supply faxed a credit request form to Good Earth Foods, and the buyer at Good Earth Foods faxed the completed form back to Wholesale Health Supply. Robin Sylvester, the sales manager at Wholesale Health Supply, saw the credit application and noticed Good Earth Foods had only been in business for two months. Thinking she might lose the order if Good Earth Foods wasn’t extended credit, Robin authorized the shipment. She figured by the time the credit department rejected the application, Good Earth Foods would have received the order and the vice president would override the rejection to keep a new customer. Robin was sure that everything would turn out alright.

  1. 1. Do you think Robin’s decision to ship the order was unethical? Why or why not?
  2. 2. What would you have done if you were in Robin’s position?
  3. 3. Write a memo from the credit department manager to Robin Sylvester explaining the reasoning behind requiring a new credit customer to be in business for at least six months.
  4. 4. In small groups, discuss ways to prevent a situation like this from happening.

1.

To determine

Indicate whether RS’s act is unethical or not with reasons.

Explanation

Facts of the case: WH Supply is a wholesale business that sells medical supplies and equipment to the retailers. WH Supply provides credit to the retailers, only if the retailer had been in the business for a minimum of six months. After reviewing the application of GE Foods for credit request, RS, the sales manager at WH Supply, authorizes shipment to GE Foods on credit, with an intention to hold the huge order of GE Foods, although it had been in business for only two months...

2.

To determine

Indicate the action of the sales manager.

3.

To determine

Draft a memorandum to RS, the sales manager, explaining the reasons for the credit policy of the company.

4.

To determine

Indicate some ways to prevent the situation like the one that occurred in the given case.

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