Question :

BYP3-6 Bluestem Company is a pesticide manufacturer. Its sales declined really this year due to the passage of legislation outlawing the sale of several of Bluestem's chemical pesticides. In the coming year, Bluestem will have competitive chemicals and environmentally safe to replace these discontinued products.

Sales in the subsequently year are expected to really exceed any prior year's. The decline in sales and profits appears to be a one-year aberration. But even so, the company president fears a large dip in the present year's profits. He considers that such a dip could cause a significant drop in the market price of Bluestem's stock and make the company a takeover target.

To avoid this option, the company president calls in Cathi Bell, controller, to show this period's year-end adjusting entries. He urges her to accrue possible revenue and to defer as many expenses as possible. He says to Cathi, "We require the revenues this year, and next year will easily absorb expenses deferred from this year. We can't let our stock price be hammered down!" Cathi didn't get around to recording the adjusting entries until January 17, but she dated the entries December 31 as if they were recorded then. Cathi also made each effort to comply with the president's request.

Instructions

(a) Who are the stakeholders in this situation?

(b) Evaluate the ethical considerations of (1) the president's request and (2) Cathi's dating the adjusting entries December 31?

(c) Can Cathi accrue revenues and defer expenses and still be ethical?