Horizon Corporation manufactures personal computers. The company began operations in 2013 and reportedprofits for the years 2013 through 2016. Due primarily to increased competition and price slashing in the industry,2017’s income statement reported a loss of $20 million. Just before the end of the 2018 fiscal year, a memo fromthe company’s chief financial officer to Jim Fielding, the company controller, included the following comments:If we don’t do something about the large amount of unsold computers already manufactured, our auditors willrequire us to write them off. The resulting loss for 2018 will cause a violation of our debt covenants and forcethe company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. Iknow the company’s president and he will accept the merchandise and acknowledge the shipment as a purchase.We can record the sale in 2018 which will boost profits to an acceptable level. Then J.B. Sales will simply returnthe merchandise in 2019 after the financial statements have been issued.Required:Discuss the ethical dilemma faced by Jim Fielding.
Horizon Corporation manufactures personal computers. The company began operations in 2013 and reported
profits for the years 2013 through 2016. Due primarily to increased competition and price slashing in the industry,
2017’s income statement reported a loss of $20 million. Just before the end of the 2018 fiscal year, a memo from
the company’s chief financial officer to Jim Fielding, the company controller, 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 for 2018 will cause a violation of our debt covenants and force
the company into bankruptcy. 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 shipment as a purchase.
We can record the sale in 2018 which will boost profits to an acceptable level. Then J.B. Sales will simply return
the merchandise in 2019 after the financial statements have been issued.
Required:
Discuss the ethical dilemma faced by Jim Fielding.
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