ACC340 Unit 5 Discussion - Ethics

*Unit 5 Discussion - Ethics Case 13–17 Profits guaranteed ? LO13–5 (ACC340 Intermediate Accounting II)

This was Joel Craig’s first visit to the controller’s corner office since being recruited for the senior accountant position in May. Because he’d been directed to bring with him his preliminary report on year-end adjustments, Craig presumed he’d done something wrong in preparing the report. That he had not was Craig’s first surprise. His second surprise was his boss’s 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 manufacturer’s defects. “Don’t you think 4% of sales is a little high for our warranty expense estimate?” his boss wondered. “After all, we’re new at this. We have little experience with product introductions. I just got off the phone with Blanchard (the company president). He thinks we’ll have trouble renewing our credit line with the profits we’re projecting. The pressure’s on.”

Required:

· Should Craig follow his boss’s suggestion?

· Does revising the warranty estimate pose an ethical dilemma?

· Who would be affected if the suggestion is followed?