Financial & Managerial Accounting 3rd Edition by Charles Horngren,Harrison, Walter,Suzanne Oliver

تمرين 43

Making an ethical judgment
Citizenship Bank has a loan receivable from Therot Recording Company. Therot is late making payments to the bank, and Robert Phelps, a Citizenship Bank vice president, is helping Therot restructure its debt. Phelps learns that Therot is depending on landing a $1,000,000 contract from Starstruck Theater, another Citizenship Bank client. Phelps also serves as Starstruck's loan officer at the bank. In this capacity, he is aware that Starstruck is considering declaring bankruptcy. Phelps has been a great help to Therot, and Therot's owner is counting on him to carry the company through this difficult restructuring. To help the bank collect on this large loan, Phelps has a strong motivation to help Therot survive.
Requirements
1. Identify the ethical issue that Phelps is facing. Specify the two main alternatives available to Phelps.
2. Identify the possible consequences of Phelps identifying Starstruck's financial position to Therot Recording Company.
3. Identify the correct ethical decision Phelps must make based on the two alternatives identified in Requirement 2.