Ethic Case Byp1-6

Wiley Plus: Ethical Case - BYP1-6

Marjorie Williams

ACC/349

January 11. 2016

Leonard Glendale

Wiley Plus: Ethical Case - BYP1-6

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In the Wiley Plus, BYP1-6, the following ethical case is displayed: “Wayne Terrago, the controller for Robbin Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother him—advertising. During the year, the company had instituted an expensive advertising campaign to sell some of its slower-moving products. It was still too early to tell whether the advertising campaign was successful. There had been much internal debate as how to report advertising cost. The vice president of finance argued that advertising costs should be reported as a cost of production, just like direct materials and direct labor. He, therefore, recommended that this cost is identified as manufacturing overhead and reported as part of inventory costs until sold. Others disagreed. Terrago believed that this cost should be reported as an expense of the current period, based on the conservatism principle. Others argued that it should be reported as Prepaid Advertising and reported as a current asset. The president finally had to decide the issue. He argued that these costs should be reported as inventory. His arguments were practical ones. He noted that the company was experiencing financial difficulty and expensing this amount in the current period might jeopardize a planned bond offering. Also, by reporting the advertising costs as inventory rather than as prepaid advertising, less attention would be directed to it by the financial community” (Weygandt, Kimmel, & Kieso, 2010). |

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| (a)   | Who are the stakeholders in this situation? Internal Stakeholders: * Wayne Terrago – Controller * The Vice President of Robbins Industries * The President of Robbins Industries * Robbins Industries employees * Robbins auditors * Robbins...