Casper Chemical recently acquired a building located on two acres of land for a lump-sum price of $3.2 million. In your job as assistant controller, you determined the allocation of the price using the relative fair values to be $1 million and $2.2 million for the land and building, respectively. When you reported these initial values to Jake Reese, the company's controller, he told you to change the allocation to $1.5 million for the land and $1.7 million for the building. When you asked him why the change, he explained that the company is having a difficult time meeting profitability goals and that his proposed allocation will help the bottom line for future years.
Required:
1. How will the controller's proposed allocation help the bottom line in future years?
2. Discuss the ethical dilemma faced by the assistant controller.

Question

Quizplus · Accepted Answer

The Answer of Casper Chemical recently acquired a building located on two acres of land for a lump-sum price of $3.2 million. In your job as assistant controller, you determined the allocation of the price using the relative fair values to be $1 million and $2.2 million for the land and building, respectively. When you reported these initial values to Jake Reese, the company's controller, he told you to change the allocation to $1.5 million for the land and $1.7 million for the building. When you asked him why the change, he explained that the company is having a difficult time meeting profitability goals and that his proposed allocation will help the bottom line for future years.
Required:
1. How will the controller's proposed allocation help the bottom line in future years?
2. Discuss the ethical dilemma faced by the assistant controller.

Casper Chemical Recently Acquired a Building Located on Two Acres