Castle Corporation Case Summary

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Abstract
Charlene Battle, controller for Castle Corporation is preparing the company’s financial statements at year-end. She notes that the company lost a considerable amount on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Battle knows the losses cannot be reported as an unusual item. She also does not want to highlight it as a material loss since she feels that will reflect poorly on her and the company. She reasons that if the company had recorded more depreciation during the assets’ lives when they were in use, the losses would not be so great. Since depreciation is included among the company’s operating expenses, she wants to report the losses in the income statement along with the company’s expenses, where she hopes it will not be noticed. Instructions:
(a)What are the ethical issues involved?
(b)Who are the stakeholders?
(c) What are the possible alternatives for reporting the losses? What should Battle do?
Keywords: Financial Statements, Unusual Item, Operating Expenses.
Ethical Issues
Ethical issues are any problem that requires a person or organization to choose between alternatives that must be judged as right or wrong.
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Also, she reasons that recording more depreciation of assets wouldn’t have caused the loss to be so great. However, she wants to report the losses in the income statement along with the company’s expenses, where she hopes it will not be noticed.
The ethical issues involved are 1) Charlene Battle not wanting to report the material loss because it would be unfavorable to the the users of the financial statement. 2) Reasoning that increasing depreciation on the asset’s lives wouldn’t cause the loss to be great and 3) Reporting losses in the income statement along with the company’s expenses, where she hopes it’s not

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