Health Corporation has several notes receivable reported as current assets on its year-end balance sheet. While...
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Health Corporation has several notes receivable reported as current assets on its year-end balance sheet. While collection seems certain, it may be delayed beyond one year. Because of this, the controller wants to reclassify these notes as non-current. Health's treasurer also thinks that collection will be delayed but does not favor reclassification because this will reduce the current ratio from 1.5:1 to 0.8:1. This reduction in current ratio is detrimental to company prospects for securing a major loan. Answer the following questions: ● Should the controller reclassify the notes? Give your reasons. Does the treasurer's position pose an ethical dilemma for the controller? Explain your answer. Health Corporation has several notes receivable reported as current assets on its year-end balance sheet. While collection seems certain, it may be delayed beyond one year. Because of this, the controller wants to reclassify these notes as non-current. Health's treasurer also thinks that collection will be delayed but does not favor reclassification because this will reduce the current ratio from 1.5:1 to 0.8:1. This reduction in current ratio is detrimental to company prospects for securing a major loan. Answer the following questions: ● Should the controller reclassify the notes? Give your reasons. Does the treasurer's position pose an ethical dilemma for the controller? Explain your answer.
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ANSWER Yes The controller should reclassify the notes from current notes receivable to non current ... View the full answer
Related Book For
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119368458
7th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
Posted Date:
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