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Mi Hueva

In: Social Issues

Submitted By edusainz
Words 516
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CASE 2: CONTINGENCIES. Do we really want to…?

(Version for Lab session 2)

The case is made up of four sections

a) Present solution for E13-11

b)
This was Joel Craig’s first visit to the controller’s corner office since being recruited for the senior accountant position in May. Because he’d been directed to bring with him his preliminary report on year-end adjustments, Craig presumed he’d done something wrong in preparing the report. That he had not was Craig’s first surprise. His second surprise was his boss’s request to reconsider one of the estimated expenses.
S&G Fasteners was a new company, specializing in plastic industrial fasteners. All products carry a generous long-term warranty against manufacturer’s defects. “Don’t you think 4% of sales is a little high for our warranty expense estimate?” his boss wondered. “After all, we’re new at this. We have little experience with product introductions. I just got off the phone with Blanchard (the company president). He thinks we’ll have trouble renewing our credit line with the profits we’re projecting. The pressure’s on.”
Required:
1. Should Craig follow his boss’s suggestion?
2. Does revising the warranty estimate pose an ethical dilemma?
3. Who would be affected if the suggestion is followed?

c)

As a second-year financial analyst for A.J. Straub Investments, you are performing an initial analysis on Fizer Pharmaceuticals. You have taken its balance sheet and have calculated a Debt to Equity ratio

Fizer Pharmaceuticals ($ million)
Balance Sheet (Dec.31, 2010)
Assets Equity + Liabilities
Plant Assets 100 Share Capital 60
Merchandise inventory 60 Retained Earnings 40
Accounts receivable 80 Notes payable 80
Cash 10 Accounts payable 70
Total 250 Total 250

As a good analyst you read carefully all disclosure notes and find out that Fizer has been designated as a potentially

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