Bartlet Financial Services Company holds a large portfolio of debt and share securities as an investment The total fair value of the portfolio at December 31, 2017, is greater than total cost Some securities have increased in value and others have decreased Deb Faust, the financial vice president, ...

a Classifying the securities as they propose will indeed have the effect on net income that they say ...

Bartlet Financial Services Company holds a large portfolio of debt and share securities as an investment. The

Question:

Bartlet Financial Services Company holds a large of debt and share securities as an investment. The total fair value of the at December 31, 2017, is greater than total cost. Some securities have increased in value and others have decreased. Deb Faust, the financial vice president, and Jan McCabe, the controller, are in the process of classifying for the first time the securities in the suggests classifying the securities that have increased in value as trading securities in order to increase net income for the year. She wants to classify the securities that have decreased in value as long-term non-trading securities, so that the decreases in value will not affect 2017 net income.
McCabe disagrees. She recommends classifying the securities that have decreased in value as trading securities and those that have increased in value as long-term non-trading securities. McCabe argues that the company is having a good earnings year and that recognizing the losses now will help to smooth income for this year. Moreover, for future years, when the company may not be as profitable, the company will have built-in gains.
Instructions
(a) Will classifying the securities as Faust and McCabe suggest actually affect earnings as each says it will?
(b) Is there anything unethical in what Faust and McCabe propose? Who are the affected by their proposals?
(c) Assume that Faust and McCabe properly classify the At year-end, Faust proposes to sell the securities that will increase 2017 net income, and McCabe proposes to sell the securities that will decrease 2017 net income. Is this unethical?
Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...