Page 30 - tmp

Student Preparation Strategy

Student Preparation Strategy

Everyday Ethical Dilemma

This exercise is intended to prepare students for issues they may face at some point in their working
career in accounting. It also reinforces their understanding of currently covered material, in this case,
how cash discounts work. Critical thinking is also required to examine the alternatives related to the
issue.

Dilemma

Take the discount or not.

John Graham works in the accounting department of Wilcox and Company. It is John’s job to review
the accounts payable data to make sure that the company takes advantage of all discounts that are
offered for early payment. He noticed that he overlooked an offered discount from Allray Company.
He mentions his error to his supervisor, Mary Scott. Mary ponders the issue a bit and, since the
discount amount is material, suggests that John write the check to Allray, taking the discount. She
also instructs him to backdate the check so it appears to have been written within the discount
period. What should John do, and explain your reason(s).

23