Patterson Company is a large diversified business with a unit that sells commercial real estate….
Patterson Company is a large diversified business with a unit that sells commercial real estate. As a company, Patterson has been profitable in recent years with the exception of the real estate business, where economic conditions have resulted in weak sales. The vice president of the real estate division is aware of the poor performance of his group and needs to find ways to ‘‘show a profit.’’ During the current year, the division is successful in selling a 100-acre tract of land for a new shopping center. The original cost of the property to Patterson was $4 million. The buyer has agreed to sign a $10 million note with payments of $2 million due at the end of each of the next five years. The property was appraised late last year at a market value of $7.5 million. The vice president has come to you, the controller, asking that you record a sale for $10 million with a corresponding increase in Notes Receivable for $10 million.
Required Use the Ethical Decision Framework in Exhibit 1-9 to complete the following requirements: 1. Recognize an ethical dilemma: What ethical dilemma(s) do you face? 2. Analyze the key elements in the situation: a. Who may benefit if you follow the vice president’s request? Who may be harmed? b. How are they likely to benefit or be harmed? c. What rights or claims may be violated? d. What specific interests are in conflict? e. What are your responsibilities and obligations? 3. List alternatives and evaluate the impact of each on those affected: As controller, what are your options in dealing with the ethical dilemma(s) you identified in (1) above? If the sale of the real estate is recorded as the vice president requests, will users have the reliable information needed to make decisions? Why or why not? 4. Select the best alternative: Among the alternatives, which one would you select?