Accounting

Ethical Issue: Reclassification of Receivables

Respond to the following ethical issue concerning the reclassification of receivables in your initial post:

Moss Exports is having a bad year. Net income is only $60,000. Also, two important overseas customers

are falling behind in their payments to Moss, and Moss's accounts receivable are ballooning.

The company desperately needs a loan. The Moss Exports board of directors is considering ways to put

the best face on the company's financial statements. Moss's bank closely examines cash flow from

operations. Daniel Peavey, Moss's controller, suggests reclassifying as long -term the receivables from

the slow -paying clients. He explains to the board that removing the $80,000 rise in accounts receivable

from current assets will increase net cash provided by operations. This approach may help Moss get the

loan.

1. Using only the amounts given, compute net cash provided by operations, both without and with the

reclassification of the receivables. Which reportin g makes Moss look better?

2. Under what condition would the reclassification of the receivables be ethical? Unethical? Support your

response.

Due 3/10/17