Concept explainers
Ethics Case 7–5
Uncollectible accounts
• LO7–5
You have recently been hired as the assistant controller for Stanton Industries, a large, publicly held manufacturing company. Your immediate superior is the controller who, in turn, is responsible to the vice president of finance.
The controller has assigned you the task of preparing the year-end
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 a 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.”
Required:
1. What is the effect on income before taxes of the change requested by the controller?
2. Discuss the ethical dilemma you face. Consider your options and responsibilities along with the possible consequences of any action you might take.
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LooseLeaf Intermediate Accounting w/ Annual Report; Connect Access Card
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