HIRE QUALIFIED ACADEMIC WRITERS
New Wave Images is a graphics design firm that prepares its financial statements usinga calendar year. Manny Kinn, the company treasurer and vice president of finance, hasprepared a classified balance sheet as of December 31. In January, this balance sheet willbe submitted along with an application for a loan from First Peoples Community Bank.An excerpt from the balance sheet follows:Cash $ 25,000Accounts receivable 85,000Total assets $250,000The accounts receivable balance includes a $56,000 loan to Tom Morrow, the companypresident. Tom borrowed the money from New Wave 18 months earlier for a down payment on anew home. Tom has orally assured Manny that he will pay off the loan withinthe next year. Because Tom is the company president, Manny treats the amount due aspart of its normal accounts receivable. In addition, Manny knows that the bank will consider a largebalance in accounts receivable more favorably than a large personal loan toa single individual. Manny reported the $56,000 in the same manner on the precedingyear’s balance sheet.Required:a. Is Manny behaving ethically by reporting the loan to Tom as a trade accountreceivable? Why or why not?b. Who will be affected by Manny’s decision?
0 comments