Grandma’s Cookie Company purchased a factory building. The company controller, Don Nelson, is in the process of allocating the lump-sum purchase price between land and building. Don suggests to the company’s chief financial officer, Judith Prince, that they fudge a little by allocating a disproportionately higher share of the price to land. Don reasons that this will reduce depreciation expense, boost income, increase their profit-sharing bonus, and hopefully, increase the price of the company’s stock. Judith has some reservations about this because the higher reported income will also cause income taxes to be higher than they would be if a correct allocation of the purchase price were made.
What stakeholders’ interest are in conflict?
What are the ethical issues?
Include the following:
Step 1—The Facts:
Step 2—The Ethical Issue and the Stakeholders:
Step 5—Evaluation of Alternatives in Terms of Values:
Step 7—Decision: Student must decide their course of action