Accounting -Ethics case After a decade of consistent income growth

| January 30, 2017

Question
Ethics case After a decade of consistent income growth, the Cranor Corporation sustained a before-tax loss of $8.4 million in 2011. The loss was primarily due to $10 million in expenses related to a product recall. Cranor manufactures medical equipment, including x-ray machines. The recall was attributable to a design flaw in the manufacture of the company’s new line of machines. The company controller, Jim Dietz, has suggested that the loss should be included in the 2011 income statement as an extraordinary item. “If we report it as an extraordinary item, our income from continuing operations will actually show an increase from the prior year. The stock market will appreciate the continued growth in ongoing profitability and will discount the one-time loss. And our bonuses are tied to income from continuing operations, not net income.” The chief executive officer asked Jim to justify this treatment. “I know we have had product recalls before and, of course, they do occur in our industry,” Jim replied, “but we have never had a recall of this magnitude, and we fixed the design flaw and upgraded our quality control procedures.” The whole report 2 pages double space 1. A summary of the ethical dilemma 2. A list of at least four key stakeholders and a description of what each stakeholder has to gain or lose (Please note that if the case mentions more than four key stakeholders, then you should list all of them. If the case mentions fewer than four, then you should still think of at least four. In some situations, key stakeholders, such as investors, are not specifically mentioned; yet they may have the most at stake!) 3. Include a discussion of the possible resolutions and the consequences or conflicts resulting from each possible resolution.

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