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acc_280_week_5_final_exam_1..xlsx

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Ethics Case
BYP8-6
You are the assistance controller in charge of general ledger accounting at Riverside Bottling
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, which you report to Gena Schmitt, the financial vice
president. Gena excitedly instructs you to keep the cash receipts book open for one additional
day for purposes of the June 30 report to the insurance company. Gena says, “If we don’t get that
cash balance over $200,000, we’ll default on out loan agreement.They could close us down, put
us all out of our jobs!” Gena continues, “I talked to Oconto Distributor (one of Riverside’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!”
Instructions
(a) Who will suffer negative effects if you do not comply with Gena Schmitt’s instructions?
Who will suffer if you do compy?
(b) What are the ethical consideration in this case?
(c) What alternatives do you have?
-------------
ANSWER
BYP8-6
(a) If we do not comply with Gena Schmitt’s instructions the
company could default on the insurance loan and
essentially be in danger of closing its doors. If this
happens then everyone at the site will lose their jobs.
If there are legal issues with re-opening the doors the
company could suffer extreme financial loss trying to
obtain insurance coverage again or paying fees associated
to the defaulted loan. If the company does comply then
the company is not reporting its financial information
correctly and could be out of compliance with GAAP when
stating the next month’s cash not yet received in current
month’s financial information. Being out of compliance
will carry a whole different set of penalties and
potential criminal acts.
As the assistant controller, you may suffer negative
effects from Gena, if you do not follow her request. It
is possible that the insurance company will react as Gena
suggested, however, most likely not.
If you follow Gena’s request, and falsify the June 30
cash balance by holding the cash receipts book open for
one day, you are risking your integrity. Further, if

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Ethics Case BYP8-6 You are the assistance controller in charge of general ledger accounting at Riverside Bottling 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, which you report to Gena Schmitt, the financial vice president. Gena excitedly instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Gena says, “If we don’t get that c ...
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