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Ethics Case Accounting 280

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BYP8-6 - Ethics Case

BYP8-6 - Ethics Case

(a) Who will suffer negative effects if you do not comply with Gena Schmitt's instructions? Who will suffer if you do comply?

The company and I, the assistant controller, will suffer negative effects regarding whether I comply or not. Leaving the cash receipt book open pass the end of the monthly accounting periods is not an accepted accounting practice. I would be falsifying the receipt of the check because it would be after the end of the monthly accounting period. I would be held accountable for recording a transaction that did take place in June, and therefore practicing poor internal control principles. The company would suffer regardless because it did not maintain the agreed upon cash account balance of 200,000 dollar at the end of each month. The accurate balance of 80,000 dollars is not the monthly agreed amount and could result in the company defaulting on the terms of the loan.

(b) What are the ethical considerations in this case?

The ethical considerations in this case is whether or not Riverside Bottling Company's cash receipt books should stay opened pass June 30 to account for a check mail out by Oconto Distributors, the company's largest customer. In addition, is it ethically correct to account for 150,000 dollars in the cash receipt book for cash not yet received?

(c) What alternatives do you have?

An alternative to this dilemma is the use of mechanical and electronic controls. The use of accounting programs and software built into Riverside Bottling Company's computer system is an effective alternative with definitive password access. This will heighten the validity and accurateness of the company's cash receipt account balance at the end of each month which is a prerequisite for the loan. Another alternative is for upper management to appoint internal auditors to assess on a continuous basis the financial department's activities and practices to verify whether accounting procedures are being adhered to and followed. In addition, senior leaders could segregate the duties and ensure proper documentation procedures are following regarding cash receipt book.

P15-1)

(a) Condensed Income Statement

For the Year Ended December 31, 2009

Douglas Company Maulder Company

Dollars Percent Dollars Percent

Net sales

Cost of goods sold

Gross profit

Operating expenses

Income from operations

Other expenses and losses

Interest expense

Income before income taxes

Income tax expense

Net income $1,549,035

1,080,490

468,545

302,275

166,270

8,980

157,290

54,500

$ 102,790 100.0%

69.8%

30.2%

19.5%

10.7%

.6%

10.1%

3.5%

6.6% $339,038

241,000

98,038

79,000

19,038

2,252

16,786

6,650

$ 10,136 100.0%

71.1%

28.9%

23.3%

5.6%

...

...

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