Short answers (NOT LONG PARAGRAPHS), objective responses with personal opinions.
1. Ethics and professional conduct in business
Laser Graphics is a graphics art design consulting firm. Spencer Lowry, its treasurer and vice president of finance, has prepared a classified balance sheet as of March 31, 2014, the end of its fiscal year. This balance sheet will be submitted with Laser Graphics’ loan application to American Trust & Savings Bank.
In the Current Assets section of the balance sheet, Spencer reported a $90,000 receivable from Jackie Doyle, the president of Laser Graphics, as a trade account receivable. Jackie borrowed the money from Laser Graphics in April 2012 for a down payment on a new home. She has orally assured Spencer that she will pay off the account receivable within the next
year. Spencer reported the $90,000 in the same manner on the preceding year’s balance sheet.
Evaluate whether it is acceptable for Spencer to prepare the March 31, 2014, balance sheet in the manner indicated above.
2.Ethics and professional conduct in business
On March 13, 2014, Plant-Wise Company, a garden retailer, purchased $18,000 of seed, terms 2/10, n/30, from Premium Seed Co. Even though the discount period had expired, Brendan Morton subtracted the discount of $360 when he processed the documents for payment on March 26, 2014.
Discuss whether Brendan Morton behaved in a professional manner by subtracting the discount, even though the discount period had expired.
3. Ethics and professional conduct in business
Contours Co. is experiencing a decrease in sales and operating income for the fiscal year ending July 31, 2014. Mark Irwin, a controller of Contours Co., has suggested that all orders received before the end of the fiscal year be shipped by midnight, July 31, 2014, even if the shipping department must work overtime. Since Contours Co. ships all merchandise FOB shipping point, it would record all such shipments as sales for the year ending July 31, 2014, thereby offsetting some of the decreases in sales and operating income.
Discuss whether Mark Irwin is behaving in a professional manner.
4. Ethics and professional conduct in business
During the preparation of the bank reconciliation for Regal Concepts Co., Misty Watts, the assistant controller, discovered that Windsor National Bank incorrectly recorded a $15,750 check written by Regal Concepts Co. as $1,575. Misty has decided not to notify the bank but wait for the bank to detect the error. Misty plans to record the $14,175 error as Other Income if the bank fails to detect the error within the next three months.
Discuss whether Misty is behaving in a professional manner.