Ethics Case
BYP8-6
You are the assistant 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 our loan agreement. They
could close us down; put us all out of our jobs!” Gena continues, “I talked to Oconto
Distributors (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
1.
Who will suffer negative effects if you do not comply with Gena Schmitt’s
instructions? Who will suffer if you do comply?
If you do not comply then the business will be forced to close down and all
employees will be out of work. If you do comply and are caught, you could definitely
be fired and possibly jailed for cooking the books. Maybe Gena Schmitt will be fired
as well but there is no guarantee of that in the real world. You are the one who
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- Spring '11
- Sierra
- Balance Sheet, Net Income, Generally Accepted Accounting Principles, Douglas, Douglas Company
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