Imagine you are the assistant controller in charge of generalledger accounting at Linbarger Company. Your company has a largeloan from an insurance company. The loan agreement requires thatthe companyâs cash account balance be maintained at $200,000 ormore, as reported monthly. At June 30, the cash balance is $80,000.You give this update to Lisa Infante, the financial vice president.Lisa is nervous and instructs you to keep the cash receipts bookopen for one additional day for purposes of the June 30 report tothe insurance company. Lisa says, âIf we donât get that cashbalance over $200,000, weâll default on our loan agreement. Theycould close us down, put us all out of our jobs!â Lisa continues,âI talked to Oconto Distributors (one of Linbargerâs largestcustomers) this morning. They said they sent us a check for$150,000 yesterday. We should receive it tomorrow. If we includejust that one check in our cash balance, weâll be in the clear.Itâs in the mail!â
Questions
What is the accounting problem that the Linbarger Companyfaces?
What are the ethical considerations in this case? Providerationale for why these are ethical considerations.
What are the negative impacts that can happen if you do notfollow Lisa Infanteâs instructions to wait one more day to post thebalance?
Who will be negatively impacted if you do comply? Provide arationale for why these individuals will be impacted.
What is one alternative that you could pursue in this scenario?Support your recommendations with information you learned in thisclass.
Imagine you are the assistant controller in charge of generalledger accounting at Linbarger Company. Your company has a largeloan from an insurance company. The loan agreement requires thatthe companyâs cash account balance be maintained at $200,000 ormore, as reported monthly. At June 30, the cash balance is $80,000.You give this update to Lisa Infante, the financial vice president.Lisa is nervous and instructs you to keep the cash receipts bookopen for one additional day for purposes of the June 30 report tothe insurance company. Lisa says, âIf we donât get that cashbalance over $200,000, weâll default on our loan agreement. Theycould close us down, put us all out of our jobs!â Lisa continues,âI talked to Oconto Distributors (one of Linbargerâs largestcustomers) this morning. They said they sent us a check for$150,000 yesterday. We should receive it tomorrow. If we includejust that one check in our cash balance, weâll be in the clear.Itâs in the mail!â
Questions
What is the accounting problem that the Linbarger Companyfaces?
What are the ethical considerations in this case? Providerationale for why these are ethical considerations.
What are the negative impacts that can happen if you do notfollow Lisa Infanteâs instructions to wait one more day to post thebalance?
Who will be negatively impacted if you do comply? Provide arationale for why these individuals will be impacted.
What is one alternative that you could pursue in this scenario?Support your recommendations with information you learned in thisclass.
