CC s $($Purchase Commitments$)$ Prophet Company signed a long$-$term purchase

contract to buy timber from the U$.$S$.$ Forest Service at $$300$ per thousand board feet. Under these terms,

Prophet must cut and pay $$6,000,000$ for this timber during the next year. Currently, the market value is

$$250$ per thousand board feet. At this rate, the market price is $$5,000,000.$ Jerry Herman, the controller,

wants to recognize the loss in value on the year$-$end financial statements, but the financial vice president,

Billie Hands, argues that the loss is temporary and should be ignored. Herman notes that market value

has remained near $$250$ for many months, and he sees no sign of significant change.

Instructions

a$.$ What are the ethical issues, if any?

b$.$ Is any particular stakeholder harmed by the financial vice president$$s decision?

c$.$ What should the controller do$?$