Assignment: Ethics in Accounting Due Week 9 and worth 120 points Effective financial reporting depends on sound ethical behavior. Financial scandals in accounting and the businesses world have...

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Assignment: Ethics in Accounting


Due Week 9 and worth 120 points


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 textbook for guidance on how to think through the scenario.

  • This course requires the use of newStrayer Writing Standards (SWS). The format is different from other Strayer University courses. Please take a moment to review the SWS documentation for details.



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 a 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 the information you learned in this class.

Answered Same DayMar 08, 2021

Answer To: Assignment: Ethics in Accounting Due Week 9 and worth 120 points Effective financial reporting...

Kushal answered on Mar 09 2021
131 Votes
1. As per the covenants in the loan obtained from the insurance company, the firms has to ensure that they keep enough cash balance in the accounts. According to the agreement, Linbarger company has to maintain cashflow balance of 200,000 dollars in the accounts and currently the firm is struggling to maintain only 80,000 cash balance. Hence, there is a risk of breach of agreement and this could be revoked and the insurance company might ask for the loan back and impose the penalties and fines for the same. To avoid this, Linbarger company is planning to show the pending amount from one for the distributors as the cash which is not received yet. With this cash balance, the Linbarger company would be good to go and there won't be any breach of the agreement. However, this would not be ethical in multiple terms due to firm not been able to manage the required cash balance in the accounts. Here, we are manipulating the cash and the account receivables accounts in order to ensure that there is no breach of the agreement and the adverse effects of the same are not felt.
2.Ethical considerations -
As per the loan agreement, the firm has maintain the cash balance to ensure that the terms of the agreement are not breached. However, the controller is suggesting to the vice president and alternative work...
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