Intermediate Accounting I Case due Thursday Horizon Corporation manufactures personal computers. The company began operations in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Intermediate Accounting I Case due Thursday Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2016. Due to increased competition and price slashing in the industry, 2017's income statement reported a loss of $2 million. Sales in 2018 continue to be soft and there are many unsold computers sitting in the company's warehouse. Horizon Corporation has several loans outstanding with a local bank. The debt agreements contain a covenant stating that Horizon must maintain a current ratio of at least 0.9. Violations of the debt agreement may result in increases in borrowing costs as the bank may negotiate a higher rate. Just before the end of the 2018 fiscal year, the company has current assets of $5,300,000 and current liabilities of $5,600,000. The company's current assets mainly consist of inventory ($2,100,000) and accounts receivable ($1,800,000). An analysis of inventory value reveals that a write-down of $500,000 is necessary at the year end. The company's chief financial officer wrote a memo to the company's controller. The memo included the following comments: "If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to write them off. The resulting loss will cause a violation of our debt covenants. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's president and he will accept the merchandise and acknowledge the shipments as a purchase. We can record the sale in 2018. Then J.B. Sales will simply return the merchandise in 2019 after the financial statements have been issued." Assume you are the company's controller who received the above memo from the CFO. Analyze the ethical dilemmas that you face. You may consider the following steps when analyzing the ethical issues. Step 1. Identify the facts of the situation and the ethical issues involved. Step 2. Identify the stakeholders who may be affected by your decision. Step 3. Specify alternative courses of action. Step 4. Evaluate the consequences of each possible action. Step 5. Make the decision and take action. Requirements: Prepare a summary of your analysis about the ethical dilemmas and indicate the action that you would take. Based on your selected action, draft a memo to an appropriate person about this issue. The work that you submit should not exceed 2 pages, so keep your writing precise and clear. ethical Issue even bigger loss will be recorded In following years due to receiving back the inventory report to IRS mure CFD Intermediate Accounting I Case due Thursday Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2016. Due to increased competition and price slashing in the industry, 2017's income statement reported a loss of $2 million. Sales in 2018 continue to be soft and there are many unsold computers sitting in the company's warehouse. Horizon Corporation has several loans outstanding with a local bank. The debt agreements contain a covenant stating that Horizon must maintain a current ratio of at least 0.9. Violations of the debt agreement may result in increases in borrowing costs as the bank may negotiate a higher rate. Just before the end of the 2018 fiscal year, the company has current assets of $5,300,000 and current liabilities of $5,600,000. The company's current assets mainly consist of inventory ($2,100,000) and accounts receivable ($1,800,000). An analysis of inventory value reveals that a write-down of $500,000 is necessary at the year end. The company's chief financial officer wrote a memo to the company's controller. The memo included the following comments: "If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to write them off. The resulting loss will cause a violation of our debt covenants. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's president and he will accept the merchandise and acknowledge the shipments as a purchase. We can record the sale in 2018. Then J.B. Sales will simply return the merchandise in 2019 after the financial statements have been issued." Assume you are the company's controller who received the above memo from the CFO. Analyze the ethical dilemmas that you face. You may consider the following steps when analyzing the ethical issues. Step 1. Identify the facts of the situation and the ethical issues involved. Step 2. Identify the stakeholders who may be affected by your decision. Step 3. Specify alternative courses of action. Step 4. Evaluate the consequences of each possible action. Step 5. Make the decision and take action. Requirements: Prepare a summary of your analysis about the ethical dilemmas and indicate the action that you would take. Based on your selected action, draft a memo to an appropriate person about this issue. The work that you submit should not exceed 2 pages, so keep your writing precise and clear. ethical Issue even bigger loss will be recorded In following years due to receiving back the inventory report to IRS mure CFD
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Hello I'm struggling to figure out how to enter the formula on excel. Thank you
-
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2015 through 2022. Due primarily to increased competition and price...
-
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price...
-
List three common situations that suggest that relations be denormalized before database implementation.
-
Identify two or three key management skills associated with each step. Which ones are you strongest on? Weakest on?
-
Assume that a singly linked list is implemented with a header node, but no tail node, and that it maintains only a reference to the header node. Write a class that includes methods to a. Return the...
-
Ten managers, each operating identical factories, submit production budgets that are optimistic, such that each has a 25% chance of attainment. How likely is it that the total production budget for...
-
Gomez Industries produces three products from a single operation. Product A sells for $3 per unit, Product B for $6 per unit, and Product C for $9 per unit. When B is processed further, there are...
-
Find +3)(x 7)dz Question Help: Video Message instru Calculator
-
Instructions & Idea is Below: I need outlines for this. -The general purpose is to construct a full sentence outline and a Keyword for a persuasion speech: To change or reinforce the audience's...
-
Calculating the Predetermined Overhead Rate, Applying Overhead to Production, Reconciling Overhead at the End of the Year, Adjusting Cost of Goods Sold for Under- and Overapplied Overhead At the...
-
What will be the result printed on the console in the following Python coc to express your answer in the correct format. import numpy as np a = np.array([1, 2, 3]) b = np.array([3, 4, 5]) print(a + b)
-
Media Arts: Arts Education for a Digital Age https://www.researchgate.net/publication/262142960_Media_Arts_Arts_Education_for_a_Digital_Age 2. Based on the media arts article that you have read,...
-
Question 1 Landis Ltd. began its corporate services business in 2010. Since then, it has acquired and disposed of various assets which are all in Class 8, and every year, the company has taken...
-
Consider this formula. y N= X If z = 4.0 and y = 8.8, what is the value of x?
-
Using the percentage method for manual payroll with W-4s from 2020 or later in Appendix C calculate the federal withholding amounts for the following employees. No information was included in Step 4...
-
The financial statements of Eastern Platinum Limited (Eastplats) are presented in Appendix A at the end of this textbook. Instructions (a) Does East plats report any investments on its statement of...
-
Ignoring tax issues, would a shareholder with a 51% controlling interest in a company be better off buying another company or merging with it?
-
Is the dilution of EPS that follows all mergers generally greater or less than that which follows a standard capital increase?
-
Why is the determination of the exchange parity important?
Study smarter with the SolutionInn App