IF MANDY CHOOSES NOT TO SAY ANYTHING TO THE OFFICE MANAGER, IS SHE BEING UNETHICAL?

19 Jun IF MANDY CHOOSES NOT TO SAY ANYTHING TO THE OFFICE MANAGER, IS SHE BEING UNETHICAL?

Posted at 23:28h in 1Academic Level by Exams

Discussion Question -250 words and reference
Jim Tennison, L & B Corporation’s president, called the company’s chief financial officer, Fred Harden, into his office late Friday afternoon. Jim had been reviewing the projected financial statements of L & B Corporation that would be issued as of year-end. Jim told Fred he was worried that the company’s liquidity position had been declining over the past two years. Fred assured Jim that the company still had sufficient liquidity, and it had been steadily decreasing its debt. Jim said that there were three or four major stockholders who were very conservative and would raise lots of questions about the company’s declining liquidity ratios. Jim and Fred then decided to take out a two-year loan secured by some land L & B Corporation owned, put the cash in the bank, and pay the loan off after January 1. Jim told Fred to account for the transaction as a long-term liability for financial reporting purposes. They agreed that this measure would solve the problem of liquidity at the annual stockholders’ meeting because the company’s ratios would be almost identical to last year. Jim was sure that most of the stockholders were only concerned with net income and ratios.
1. If you were stockholder of L&B Corporation, how would you feel about Jim and Fred’s idea? Have any ethical principles been violated?
2. If the transaction is booked as a debit to Cash and a credit to Long-Term Notes Payable, how will it affect the company’s key current ratios and debt ratios?
3. Suppose Jim and Fred decide not to take out the loan. Write a brief note to the stockholders justifying a decrease in liquidity measures. Assure them that the company is still in the “safe range”.
4. List as many reasons as reasons as possible, both positive and negative, for a decrease in net working capital.
Discussion Question -250 words and reference

Earl Farr, Mandy Wells, and Rob Good are clerks in a busy doctor’s office. One of Earl’s responsibilities is to reconcile the bank statement. He isn’t involved in authorizing payments, writing checks,
or making deposits. Ron is the accounts receivable clerk. He posts all payments and makes bank deposits. Occasionally, when he gets busy, Earl asks Ron to perform the monthly bank reconciliation. After it is reconciled, Earl initials it as though he had done it. Mandy, who is charge of accounts payable, has been observing Earl and Ron and is considering saying something to their supervisor, the office manager. Mandy is sure the office manager is unaware of what is going on.