Ethics Case

To: Kathleen Fratianne

From: Maria Flores

Date: November 17, 2014

Re: Ethics Case-2 Assignment

Dilemma Identified

Molly Caramel, a new candy company, received more orders than they can ship on a daily basis. Molly Dillon, the owner, have requested the shipping department work overtime the last two weeks in December to ship as many orders as possible by end of the year. Molly wants to show a profit in the first year of operations in order to expand. Molly wants to recognize revenue on each sale as soon as the company ships the caramels to the customers. Molly is concern if this is a good decision and if there is any accounting issues she may be overlooking. The ethical dilemma is whether to record revenue based on current shipping terms, and whether she should make the employees work overtime to inflate the income to show more profit by the end of the year.

Parties beneficed

If Molly recognizes revenue as soon, the orders leave the company; some advantages would result from this; the company would be more likely to receive loans. When the creditors check the company’s income statement will notice how profitable the company is doing. The employees would benefit by having extra money for working extra hours. The company would have a better chance to expand, and more investors would be willing to be a partner in the company.

Parties Harmed

Furthermore, if Molly records revenue as soon the goods are ship, many parties would be harmed. Users of financial statements, external stockholders, and parties that may invest in the company if it expands could be misled. Wrong information will be provided for the revenue of the company’s statements, because part of the orders would not yet be a revenue if the company is in charge of the cost of the transportation. If an auditor checks the company statements, Molly's reputation would be stained, and the company would have to pay penalties for not follow GAAP Principles. As a result, many employees would...