Assignment Acc 100

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Jvqrzna06

Writing

Description

  1. Effective financial reporting depends on sound ethical behavior. Financial scandals in accounting and the businesses world have resulted in legislation to ensure adequate disclosures and honesty and integrity in financial reporting. A sound economy is contingent on truthful and reliable financial reporting.Instructions:
    • Read the following scenario.
    • Answer the questions that follow. Your answers should result in a 2-3 page submission.
    • Reference back to your text book for guidance on how to think through the scenario.

    Scenario:Imagine you are the assistant controller in charge of general ledger accounting at Linbarger Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000 or more, as reported monthly. At June 30, the cash balance is $80,000. You give this update to Lisa Infante, the financial vice president. Lisa is nervous and instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Lisa says, “If we don’t get that cash balance over $200,000, we’ll default on our loan agreement. They could close us down, put us all out of our jobs!” Lisa continues, “I talked to Oconto Distributors (one of Linbarger’s largest customers) this morning. They said they sent us a check for $150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”
    Questions
    1. What is the accounting problem that the Linbarger Company faces?
    2. What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.
    3. What are the negative impacts that can happen if you do not follow Lisa Infante’s instructions to wait one more day to post the balance?
    4. Who will be negatively impacted if you do comply? Provide a rationale for why these individuals will be impacted.
    5. What is one alternative that you could pursue in this scenario? Support your recommendations with information you learned in this class.
    Be sure to format your paper in APA and cite information in content and list references on a reference page. See APA support at course resourses.
  2. By submitting this paper, you agree: (1) that you are submitting your paper to be used and stored as part of the SafeAssign™ services in accordance with the Blackboard Privacy Policy; (2) that your institution may use your paper in accordance with your institution's policies; and (3) that your use of SafeAssign will be without recourse against Blackboard Inc. and its affiliates.

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Explanation & Answer

Attached.

Running Head: FINANCIAL REPORTING AND ETHICAL STANDARDS

Financial reporting and ethical standards
Name of student
Instructor’s name
Course title
Date

1

FINANCIAL REPORTING AND ETHICAL STANDARDS

2

Based on the situation the company has a cash flow problem. This is not good as it
indicates that the company’s short-term expenditures have depleted all the available capital or
the company has not been very profitable. This is, however, a short-term problem as they have
money coming in that would offset the balance. They are however unable to balance their books
before the month closes (Duska, Duska & Ragatz, 2011).
The ethical issue, in this case, is cooking the books. Lisa infante knows that without the
company being able to maintain the cash balance at 200,000. The co...


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