INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
8th Edition
ISBN: 9781260118742
Author: BREWER
Publisher: MCG
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Chapter P, Problem 4E
Ethics and the Manager
Richmond. Inc., operates a chain of 44 department stores. Two years ago. the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele.
Before finalizing these plans, two stores were remodeled as a test. Linda Perlman. assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports. Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.
Required:
1. According to the IMA's Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory as obsolete?
2. Would it be easy for Perlman to take the ethical action in this situation?
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Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the
Situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.
Required:
According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for
Perlman not to report the inventory…
Ethics and the ManagerRichmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodelling of its stores to attract a more upscale clientele.Before finalizing these plans, two stores were remodelled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.1. Managerial Accounting2. Would it be easy for Perlman to take the ethical action in this situation?
Richmond, Inc. operates 44 shopping malls. Two years ago, the Richmond Board of Directors decided to renovate the store to attract more top-class customers.
Before implementing these plans, Linda Pearlman, assistant financial manager, was asked to oversee financial reporting for the pilot shop, and it was known that she and other executives receive bonuses for the company's sales growth and profitability.
As she filled in the financial report, she discovers that there are inventory items that have been out of fashion and that these items should be discounted for sale or returned to the manufacturer. She consulted this situation with her management colleagues, who agreed that it was a good idea not to list these products as obsolete items. If they do, they will have a negative impact on their financial performance and certainly affect their bonuses.
Do you think that what Pearlman would do without reporting the product as a falling product? Are there ethical issues in accounting? What…
Chapter P Solutions
INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
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