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Ethical Dilemmas

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Abstract According to the phase 2 individual project assignment instructions, each student is asked to look at two scenarios and answer the related ethical questions following each one (CTU Online, 2013). Additionally, it is asked that each student provide a discussion on the new GAAP guidelines for consolidating entities, and to provide an example of a firm that has experienced trouble for failure to comply with the GAAP guidelines.

Ethical Dilemmas in Partnerships

Scenario 1: In the first scenario, there are two partners in an antique business, Mr. Right and Mr. Wrong. Mr. Right manages the store, and Mr. Wrong travels and purchases antiques to add to their store inventory. The each may borrow items from the inventory on occasion for one reason or another. While Mr. Right was out of town Mr Wrong’s daughter was married and had a desire for one of the inventory items valued at $5,000. So Mr. Wrong took the item from inventory and gave it to his daughter as a wedding gift. He recorded the item as a debit from the COGS for $5,000. The question is asked what are the ethical aspects of Mr. Wrong’s actions and how should he have recorded the transaction? To begin with, they are both wrong for allowing the other to take unpaid for inventory items from the store. It should be made clear in the partnership agreement that any inventory product removed from the store for any purpose be debited to that partner’s capital account. The way Mr. Wrong is currently recording the product makes Mr. Right equally responsible for the cost of the item ($2500 each). This is an ethical violation on Mr. Wrong’s part and violates the entity principle. An action such as this is cause for partnership solvency in many co-owned businesses. The correct way to record the taking of the

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