Reference no: EM132767343

Ameriplex

Corporation manufacturers of tablets using state-of-the-art technology. The company began operations in 2015 and reported profits for the years 2016 through 2019. Due primarily to increased competition in the industry and the impact of the pandemic on the economy, the company is projecting a loss of $20 million for 2020. The company's chief financial officer, James Davenport, sent a memo to Peter Maxwell, the company controller, that included the following comments:

If we don't do something about the large amount of unsold tablets already manufactured, our auditors will require us to write them off. The potential loss for 2020 will cause a violation of out debt covenants and for the company into bankruptcy. suggest you ship half of our inventory to P. C. Outlets, Inc. I know the company's president and he will accept the merchandise and acknowledge the shipment as a purchase. We can record the sale in 2020 which will boost profits to an acceptable level and avoid debt covenant violation. P. C. Outlets will simply return the merchandise in 2021 after the financial statements have been issued.

Required:

Problem 1. The ethical issues James Davenport and Peter Maxwell both face.

Problem 2. The major stakeholders involved and state how each stakeholders would be affected by the course of action suggested by James Davenport.

Problem 3. Explain why you believe the course of action proposed by James Davenport is ethical or unethical.

Problem 4. Recommend an alternative course of action and support your recommendation with appropriate authoritative action.