Situation:

You are the assistant controller responsible for general ledger accounting at Riverside Bottlin
Your organization has a big loan from an insurance company.
The loan contract mandates that the company’s cash account balance be kept at $200,000 o
At June 30 the cash balance is $80,000, which you report to Gena Schmitt, the financial vice p
Gena excitedly advises you to maintain the cash receipts book open for one more day for pur
Gena says, “If we don’t get that cash balance over $200,000, we’ll default on our loan agreem
They could close us down, put us all out of our jobs!”
Gena carries on, “I talked to Oconto Distributors (one of Riverside’s largest customers) this m
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!”

Negative Effects:

If you do comply:
In case you do comply and are trapped, you could certainly be terminated and possibly jailed
Gena Schmitt will be dismissed too however there is no assurance of that in the real world.
You are the one who involved in falsification of document not her--she only proposed it.
Sometimes that is sufficient to bring someone up on allegation however not always.

If you don't comply:

In case you don't abide by in that case the company will be compelled to close down and all w
People who will suffer would be the company itself, the workers and yourself as she may term
The company may still suffer because it is already June 30 and you can't depend on resource
The cash might not certainly be received.
Being the accountant, you should remain objective and do what's correct by complying with t

Ethical Considerations

Your individual and professional honesty, integrity, professionalism, and trustworthiness are a

It would be dishonest to tell a lie, even if several could lose their careers in case the company
result in pain and suffering for the loved ones of the workers.

The most respectable method to manage the problem is to be clear and sincere with the insu
rating with them, certainly they will let a one day grace period. Particularly because you were

Although the figures are black and white, there are some grey areas in the business world. Th
to work with you. Additionallyo, when a customer is sincere with the agent (they probably de
simpler to clarify the problem and decide a deal. Maybe even modifying the agreement for th
grace period or something similar to that.

Alternatives
Get in touch with the bank who holds the loan. In case the account is in good ranking they m
Banks can be reasonable in case you have a good relationship with your contact and you are
the loan either since in that case they lose money, also.
Additionally, read again the loan contract to check for any probable mitigating elements. Ma
for.
your organization.
efaulting on

eck you are waiting

 Condensed Income Statement
For the Years Ended December 31, 2009

Douglas Company
Amount
Net Sales $1,549,035
Cost of Goods Sold $1,080,490
Gross Profit $468,545

Operating Expenditures $302,275

Interest Expenditure $8,980
Total Expenditures $311,255

Income Before Income Taxes $157,290

Income Tax Expenditure $54,500
Net Income $102,790

Relative Profitability Douglas Company

Return on Assets 24.26%

Net Income 102,790.00
Average Assets 423,642.50

Return on Common Stockholders' Equity 20.56%

Net Income 102,790.00
Average Common Stockholders' Equity 500,000.00
me Statement
December 31, 2009

glas Company Maulder Company

Percentage Amount Percentage
100.0% $339,038 100.0%
69.8% $241,000 71.1%
30.2% $98,038 28.9%

19.5% $79,000 23.3%

0.6% $2,252 0.7%
20.1% $81,252 24.0%

10.2% $16,786 5.0%

3.5% $6,650 2.0%
6.6% $10,136 3.0%

glas Company Maulder Company

9.09%
10,136.00
111,532.00

8.45%
10,136.00
120,000.00
 Dillon Company
Income Statement
For the Years Ended December 31

2009
Net Sales (all on account) 600,000.00
Expendsitures
Cost of Goods Sold 415,000.00
Selling and Administrative 120,800.00
Interest Expenditure 7,800.00
Income Tax Expenditure 18,000.00
Total Expenditures 561,600.00
Net Income 38,400.00

Dillon Company
Balance Sheets
For the Years Ended December 31

2009
Assets
Current Assets
Cash 21,000.00
Short-term Investments 18,000.00
Accounts Receivable (net) 86,000.00
Stock 90,000.00
Total Current Assets 215,000.00
Plant Assets (net) 423,000.00
Total Assets 638,000.00

Liabilities and Stockholders' Equity

Current Liabilities
Accounts Payable 122,000.00
Incomes Taxes Payable 23,000.00
Total Current Liabilities 145,000.00
Long-term Liabilities
Bonds Payable 120,000.00
Total Liabilities 265,000.00
Stockholders' Equity
Usual Inventory ($5 par) 150,000.00
Saved Earnings 223,000.00
Total Stockholders' Equity 373,000.00
Total Liabilities Stockholders' Equity 638,000.00
Usual Inventory sold at $19.50/share 19.50
Allowable doubtful accts 3,000.00

Saved Earnings
saved Earnings Balance 200,000.00
Add: Net Income 38,400.00
238,400.00
Minus: payouts 15,400.00
Saved Earnings Balance 223,000.00

Current Ratio Current Assets/Current

Liabilities
Acid-Test Ratio Cash+Short-Term
Investments+Receivables(net)/C
urrent Liabilities
Receivables Turnover Net Credit Sales/Average Net
Receivables
Stock Turnover Cost of Goods Sold/Average
Inventory
Profit Margin Net Income/Net Sales
Asset Turnover Net Sales/Average Assets
Return on Assets Net Income/Average Assets
Return on Common Stockholders' Equity Net Income/Average Common
Stockholders' Equity

Earnings Per Share Net Income/Weighted Average

Common Shares Outstanding

Price-earnings Market Price per Share of

Dividend Ratio
Debt to Total Assets Ratio
Times interest Earned
Stock/Earnings per Share
Cash Payouts/Net Income
Total Debt/Total Assets
Income before Income Taxes
and Int Exp/Interest Expenditure
er 31

2008
520,000.00

354,000.00
114,800.00
6,000.00
14,000.00
488,800.00
31,200.00

er 31

2008

18,000.00
15,000.00
74,000.00
70,000.00
177,000.00
383,000.00
560,000.00

110,000.00
20,000.00
130,000.00

80,000.00
210,000.00

150,000.00
200,000.00
350,000.00
560,000.00
 2,400.00

1.48:1 1.48

0.86:1 0.86

7.50 times 7.50

5.19 times 5.19

6% 0.06
1.00 times 1.00
6% 0.06
26% 0.26

$0.26 0.26

76 times 76.17

40% 0.40
42% 0.42
8.23 times 8.23