Bartlet financial services company holds a large portfolio

Assignment Help Accounting Basics

Reference no: EM13612851

Bartlet Financial Services Company holds a large portfolio of debt and stock securities as an investment. The total fair value of the portfolio at December 31, 2014, is greater than total cost. Some securities have increased in value and others have decreased. Deb Faust, the financial vice president, and Jan McCabe, the controller, are in the process of classifying for the first time the securities in the portfolio. Faust suggests classifying the securities that have increased in value as trading securities in order to increase net income for the year. She wants to classify the securities that have decreased in value as long-term non-trading securities, so that the decreases in value will not affect 2014 net income. McCabe disagrees. She recommends classifying the securities that have decreased in value as trading securities and those that have increased in value as long-term non-trading securities. McCabe argues that the company is having a good earnings year and that recognizing the losses now will help to smooth income for this year. Moreover, for future years, when the company may not be as profitable, the company will have built-in gains.

Instructions

(a) Will classifying the securities as Faust and McCabe suggest actually affect earnings as each says it will?

(b) Is there anything unethical in what Faust and McCabe propose? Who are the stakeholders affected by their proposals?

(c) Assume that Faust and McCabe properly classify the portfolio. At year-end, Faust proposes to sell the securities that will increase 2014 net income, and McCabe proposes to sell the securities that will decrease 2014 net income. Is this unethical?

Reference no: EM13612851

Questions Cloud

Oppositely charged parallel plates are separated by 531 mm : oppositely charged parallel plates are separated by 5.31 mm. a potential difference of 600 v exists between the

If the turbine dissipates heat to its surroundings at the : a turbine operates at steady state with steam flowing through it at a rate of 36 kgmin. the steam enters the turbine at

Calculate the horizontal distance from the base of the : a man stands on the roof of a 13.0 -tall building and throws a rock with a velocity of magnitude 30.0 at an angle of

Find the point estimate for the mean length of all parts : a certain adjustment to a machine will change the length of the parts it makes but will not affect the standard

Bartlet financial services company holds a large portfolio : bartlet financial services company holds a large portfolio of debt and stock securities as an investment. the total

What is the maximum speed you could have reached and still : youre driving down the highway late one night at 20 ms when a deer steps onto the road 49 m in front of you. your

Explain the long-run adjustments that will create : explain the long-run adjustments that will create equilibrium with firms operating at their minimum efficient scale.

Consider the following enter your answers to four decimal : consider the following. enter your answers to four decimal places.a find the level of confidence assigned to an

Calculate the horizontal distance from the base of the : a man stands on the roof of a 13.0 -tall building and throws a rock with a velocity of magnitude 30.0 at an angle of

User Account

All Pages