Problem
The net realizable value of Lake Corporation's inventory has declined below its cost. Allyn Conan, the controller, wants to use the loss method to write down inventory because it more clearly discloses the decline in net realizable value and does not distort the cost of goods sold. His supervisor, Bill Ortiz, prefers the cost-of-goods-sold method to write down inventory because it does not call attention to the decline in net realizable value.
Instructions
On the basis of the case above, please answer and discuss the questions below.
• What, if any, are the ethical issues involved?
• Is any stakeholder harmed if Bill Ortiz's preference is used?
• What should Allyn Conan do?