Ronda Lopez

Brett Webster
Kiley Webster
ACCT-2540
Group 2
9/13/15
Group Ethics Paper
First Mates Wholesale Boating Supply Company (FMWBS) has found its self short
of meeting their financial goals for the year. Nick Pittman, President, has asked all of the
unit leaders and department heads to come up with plans and put them into action in
order to salvage their year-end goals.
There are two major divisions in FMWBS, Lake Products Business Unit and Deep
Sea Fishing Business Unit. These units have both met and came up with some ethical
and not so ethical ideas to put into place to meet this years earning target.
In this paper we will focus on what the Lake Products and Deep Sea Fishing Units
plans of action for the current year are. What the Deep Sea Fishing Unit did last year
that has affected the current year. As well as what professionals working in the
accounting field can do to help companies make ethical business decisions.
Current Year Plans of Action Ethical or Unethical?
Ethical
Hank of Lake Products suggestion of reclassifying the re-roofing expenditure,
from the repairs expense ledger to asset improvements, is ethical and could have been
classified this way originally. Repairs to property that result in an improvement, put it in

a better condition or extend the useful life of the property are to be capitalized and
depreciated over a period of time.
Molly Johnsons idea of relaxing the credit screening for new customers to expand
customer base is something to consider and it would be ethical, assuming they will
closely monitor those accounts and payment patterns so uncollectible accounts would
not be increased. Revenue could increase by doing this, for the current period as well
as future periods, as long as they were vigilant with collecting from these customers. If
lower screenings resulted in late or non payments, those customers would have to be
timely suspended from purchasing more, otherwise the companys cash flow could
suffer more and upcoming financial reports (uncollectible accounts which is a loss) will
be affected.
Unethical
Jeremy Tolmit of Lake Products idea to hold off paying the bills we currently have
from last months media runs is unethical. Bills should be paid when due. Companies
expect, and count on, their customers paying on time. Cash flow is necessary to pay
salaries and other expenses, so by not paying the media bill when its due may
negatively affect the employees and other operations of that business. It could also
present a problem when it comes to restarting the ad campaign.
Jeremy Tolmits suggestion of shipping the next quarters automatic marina
replenishment orders before the end of this quarter instead of waiting the usual 10 to 20
days into the new quarter is unethical. Net income would increase for this period by
shipping the orders early but it could cause several problems in the long term. To name

a few, the customers may not have the space for the inventory, it could disturb the
relationship with customers- customers would be billed early for the inventory they dont
have room for, and the next quarters financial reports will be that much lower in
revenue. Lake Products end of year inventory (assets) would be lower and accounts
receivable (asset) would be higher than they should be if the order schedule had not
been disrupted.
Molly Jackson of Deep Sea Fishings suggestion to lengthen the period of time
over which we depreciate our buildings and vehicles- twice as long an estimated life,
half as much depreciation expense is a terrible suggestion and also unethical. The
financial reports would show lower depreciation expenses for now but when the
buildings and vehicles are no longer useful and they have to acquire new ones, they will
be depreciating the old unusable property and the newly acquired property. Under
GAAP, commercial buildings and vehicles are to be depreciated over the estimated
useful life of the property. There are different depreciation methods that can be used
but they are either for the estimated useful life or sooner (accelerated methods).
Previous Year Actions Ethical or Unethical?
Miriam Arthur of the Deep Sea Fishing Business unit took action the year before
when when their department wasnt meeting goal figures. Two of these actions are not
only unethical but have have negatively affected the company in the current year.
Miriam Arthur and her teams decision to delay a few major customer shipments
till this year This made sales revenue increase. But what about their expenses? The
department delayed the shipping, in return that delayed the shipping expenses until the

current year. This is unethical because the department accelerated their revenues and
delayed their expenses, making the books incomplete.
Miriam Arthur and her teams decision to substantially increase the estimated
uncollectible accounts-receivable reserve that was then partially reversed last quarter,
inaccurately increased profits for the previous year. This put a number on the books that
they wanted to see, a number that eventually could be reversed. It made the
departments numbers look good for that year, but it came with consequences for the
next. There ended up being a partial reversal done last quarter, which made the profits
for the current year decrease. The estimated uncollectible accounts-receivable reserve
is an estimate but should be an educated estimate based on past years experience
and should not be used to make up unrealistic figures. Which makes this unethical
because her department inappropriately managed its profits to their benefit.
Accounting in Practice
First and foremost a way to show practice in ethical behavior in financial
reporting is to lead by example. As the financial reporter, you alone have the ethical
responsibility in how you report your results and people will see that. If you maintain an
ethical understanding and report accordingly, others will pick up on that. Secondly you
should have a strong code of business ethics your company abides by and stand by
them! It does no good to have a strong message if you do not stand by them, but then
Im talking in circles. The company needs to have a strong code of ethics and review
them as often as needed. Post pictures or hang banners in the workplace to remind

people of just how much you care about these policies. Stand strong in your outlined
policies when issues of ethics arise, there can be no do as I say, not as I do.

Although FMWBS is struggling to meet their financial goals, with some hard work
and use of good ethical suggestions that were presented by some of the staff members,
they may be able to get closer to their goals. Hanks suggestion to reclassify re-roofing
will reduce expenses and Molly Johnsons idea for relax credit screens could increase
revues by expanding their customer base. Its very important for the company to only
use ethical means to conduct business and finance reports; if they conduct themselves
unethically there could be disastrous effects in the future, such as losing suppliers,
losing customers, losing employees and having to expense depreciation in the future for
property that is no longer useful. The poor decisions made in the previous year are
catching up with the company now. By misreporting revenue from delayed shipments
and increasing uncollectible accounts-receivable to later reverse it has shown that it
does catch up to a company. Companies need a strong message that supports good
ethics, doing so will project honesty to their employees. Its important to be a
trustworthy company for employees and for customers as well.