The Hartley Company, owned and operated by Bill Hartley, manufactures and sells high-end ergonomic office chairs and custom bookshelves. The company has reported profits in the majority of years since the company’s inception in 1975 and is projecting a profit in 2021 of $65,000, down from $96,000 in 2020. Near the end of 2021, the company is in the process of applying for a bank loan. The loan proceeds will be used to replace manufacturing equipment to modernize the manufacturing operation. In preparing the financial statements for the year, the chief accountant, Don Davis, mentioned to Bill Hartley that net realizable value (NRV) of the bookshelf inventory is below its cost by $40,000 and should be written down in 2021. However, no write-down is necessary for office chairs because their NRV is $50,000 above cost. Bill is worried that the write-down would lower 2021 net income to a level that might cause the bank to refuse the loan. Without the loan, it would be difficult for the company to compete. This could decrease future business, and employees might have to be laid off. Bill suggests to Don that the company combine the office chairs and bookshelves into a single inventory category (office furniture) for reporting purposes, so that the combined NRV is above the combined cost. In this case, no inventory write-down would be needed. The company has not previously combined these inventory items and has no stated policy on the matter. Don is contemplating his responsibilities in this situation.

Answer the following:

1. Accounting Issue at hand, in detail

2. Ethical Issue

3. Alternative Courses of Action & Consequences of Each

4. Discuss your decision

Answer rating: 100% (QA)

A1 Facts The company reported decrease In profit desplte profits In earller years the loss reporte... View the full answer