Reference no: EM132865638

Problem - Valuing Assets - Denver Company recently hired Terry Davis as an accountant. He was given responsibility for all accounting functions related to fixed asset accounting. Tammy Sharp, Terry's boss, asked him to review all transactions involving the current year's acquisition of fixed assets and to take necessary action to ensure that acquired assets were recorded at proper values. Terry is satisfied that all transactions are proper except for an April 15 purchase of an office building and the land on which it is situated. The purchase price of the acquisition was $200,000. However, Denver Company has not reported the land and building separately. Terry hired an appraiser to determine the market values of the land and the building. The appraiser reported that his best estimates of the values were $150,000 for the building and $70,000 for the land. When Terry proposed that these values be used to determine the acquisition cost of the assets, Tammy disagreed. She told Terry to request another appraisal of the property and asked him to stress to the appraiser that the land component of the acquisition could not be depreciated for tax purposes. The second appraiser estimated that the values were $180,000 for the building and $40,000 for the land. Terry and Tammy agreed that the second appraisal should be used to determine the acquisition cost of the assets.

Required - Use the Ethical Decision Framework 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 from using the second appraisal? 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: What are your options in dealing with the ethical dilemma(s) you identified in (1) above?

4. Select the best alternative: Among the alternatives, which one would you select?