BY DAY 5 Respond to two or more of your colleagues’ postings in one or more of the following ways: Ask a probing question. Share an insight from having read your colleague’s posti

Alexa Robinson

What stakeholders’ interest are in conflict?

          The stakeholders own shares in the company and the value of those shares will be falsely inflated if the company reports higher profits than it actually earned by reducing their expenses associated with the new building. The employees are also stakeholders, and they are knowingly increasing their reported income to inflate those prices. However, with a careful audit, the subterfuge would be discovered, and the value of the company will tank due to the lack of honesty and the smaller than reported profits for that period.

What are the ethical issues?

          Violating the core values of financial reporting for personal gain if the company chooses to go forward with the plan to falsify their numbers.

Step 1—The Facts:

          Don Nelson is the company controller who is knowingly suggesting to lie on the company’s financial reporting to boost the price of the company’s stock of which he has share in as an employee. Judith Price, the chief financial officer, who also has share in the company’s worth as an employee, does not think that the false numbers will help the company’s bottom line because it will increase the real income taxes, they have to pay with money that was improperly allocated.

Step 2—The Ethical Issue and the Stakeholders:

          The ethical issue is knowingly falsifying financial information for personal gain. The controller wishes to illegally report misleading financial information to increase personal bonuses and the value of stock shares. The stakeholders are the investors, potential investors, employees, and the customers (Spiceland, Nelson & Thomas, 2020).

Step 3—Values:

          Honesty and Transparency

Step 4—Alternatives:

          Report the correct distribution of the purchase price between land and building including the depreciation cost. Accept the slightly lower profit and reassure stakeholders that the increase in production produced by the new facility will more than make up for the slight drop in income revenue for this period.

Step 5—Evaluation of Alternatives in Terms of Values:

          This alternative promotes an honest and transparent approach to financial reporting which the stakeholders will appreciate, especially since they will be informed of the reason for the income dip and reassured that profits are going to increase. This is much better than finding out later that records were falsified, and the company lied to increase their own bonuses and stock value.

Step 6—Consequences:

          Failing to correctly report the distribution of the purchase price under PPE may result in an audit which discovers the fudged numbers that will tarnish the company’s name, make current and future stakeholders reluctant to invest in the company and mistrustful of their financial reporting, fines and fees for the company for misrepresenting their finances and possible jail time (Spiceland, Nelson & Thomas, 2020). There is also the issue of higher income tax, this will need to be paid and since profits are actually lower than reported then the company’s bottom line is even significantly more reduced than it appears, because they will have to pay the taxes with a lower income than they are reporting.

          Consequences for correctly reporting the distribution of purchase prince under PPE would possibly include a slight drop in share value and less interest from stakeholders and potential investors. This could be mitigated with a statement that future profits were likely to increase thanks to the second facility allowing for greater production. Smart investors will get in while the potential is there, and the share prices are lower creating high demand for company stock and increasing stock price in addition to increasing profits once the new building in completed.

Step 7—Decision:

          The correct option is to delay profits by correctly reporting the price of the building and land purchase. The instant gratification of share bonuses and inflated profits will not be there but in the long run shareholder trust, interest in an expanding company by future investors, and profits from expansion will be much more rewarding. The threat of being caught lying and severely tarnishing the company’s reputation for years to come would also be avoided.

Benjamin Cody Cothran

Introduction: Grandma's Cookie Company is faced with a difficult decision about how to allocate the purchase price of a new factory building. The company controller, Don Nelson, proposes a disproportionate allocation of the purchase price to land to reduce depreciation expenses, increase income, and improve profit-sharing bonuses. However, the chief financial officer, Judith Prince, raises concerns that this will result in higher income taxes. This paper will examine the stakeholders' interests in conflict, the ethical issues at hand, and the alternatives available to Grandma's Cookie Company.

Stakeholders' Interests in Conflict: The stakeholders involved in this situation are the company's employees, shareholders, and the government. Don Nelson's proposed allocation would increase the company's reported income, which would benefit the employees through increased profit-sharing bonuses and shareholders through an increased stock price. However, the government's interest is in collecting accurate taxes from the company based on the true value of the assets. Don Nelson's proposal would result in a misrepresentation of the true value of the assets, leading to lower taxes paid by the company.

Ethical Issues: The primary ethical issue at hand is the conflict between the company's financial interests and the obligation to pay accurate taxes. It is unethical for Grandma's Cookie Company to misrepresent the value of its assets to pay lower taxes. As a publicly traded company, the company has a duty to its shareholders to maximize profits, but it must also abide by the law and pay accurate taxes.

Values: The values at stake in this situation include honesty, fairness, and responsibility. Honesty is important because the company must accurately report the value of its assets to the government to pay appropriate taxes. Fairness is relevant because the government and other taxpayers expect all companies to pay their fair share of taxes. Responsibility is important because the company has a responsibility to its stakeholders to maximize profits, but it must also act ethically and within the confines of the law.

Alternatives: There are several alternatives available to Grandma's Cookie Company. One option is to allocate the purchase price accurately between land and building, paying the appropriate taxes, and reporting the true value of assets. Another option is to follow Don Nelson's proposal and allocate a disproportionate amount to land to reduce depreciation expenses, increase income, and improve profit-sharing bonuses. A third option is to negotiate with the government to reduce the tax burden in exchange for investing in the local community or other social initiatives.

Evaluation of Alternatives in Terms of Values: The first alternative aligns with the values of honesty and responsibility, but may not maximize profits for the company and its stakeholders. The second alternative conflicts with the value of honesty, but may benefit the company's financial interests. The third alternative aligns with the values of responsibility and fairness, but may require significant negotiation and investment on the part of the company.

Consequences: The consequences of the alternatives vary. Accurately reporting the value of assets will result in higher taxes paid by the company, but it will also ensure compliance with the law and promote honesty and transparency. Allocating a disproportionate amount to land will reduce depreciation expenses, increase income, and improve profit-sharing bonuses, but it will misrepresent the true value of assets and may result in legal and ethical repercussions. Negotiating with the government to reduce taxes in exchange for social initiatives may benefit the company's reputation, but may not result in significant financial benefits.

Decision: Based on the values of honesty, fairness, and responsibility, Grandma's Cookie Company should allocate the purchase price accurately between land and building, paying the appropriate taxes, and reporting the true value of assets. This decision may not maximize profits for the company and its stakeholders, but it is the ethical and legal choice. The company can still invest in social initiatives to benefit the local community and improve its reputation.

Conclusion: Grandma's Cookie Company is faced with a difficult decision about how to allocate the purchase price of a new factory building. The conflict between the company's financial interests and the obligation to pay accurate taxes raises ethical concerns related to honesty, fairness, and responsibility. Ultimately, the company should prioritize these values and allocate the purchase price accurately to comply with the law and promote transparency.

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