When Remington Arms Company hired credit manager Vicki C. Sharp, unauthorized deductions were a serious problem especially
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Question:
TASK 1.
1. What is the introduction in the given case.
2. What is the background
3. Evaluation of the case
4. Proposed Solution
5. Recommendation
TASK 2. ANSWER THE QUESTION
QUESTION:
1. Explain why unauthorized deductions have been an issue.
2. Explain how to prevent unauthorized deductions.
3. Relay the lesson from preventing unauthorized deductions in real life as of today during the time of Covid - 19 Pandemic.
Lesson 9 - Legal Considerations Surrounding Credit
Task 1: Case Analysis.
Because of the size of credit demanded by a smaller mid-size customer, the credit manager required quarterly financial statements from the customer's accounting firm. He noted that the company, which was 100% owned by a husband and wife, had a slowly dwindling cash position. When asked about it, the couple said it was a result of normal business conditions. Eventually, payments stopped, leaving the supplier with several hundred thousand dollars outstanding. The account was then turned over to a collection agency. Since the vendor in question was the customer's main supplier and it had stopped shipping, the business was winding down and the agency was not able to collect. The account was then turned over to a lawyer who sued the customer. The vendor won a judgment in court but at that point there was nothing left to collect. At this point, the company was able to subpoena bank records, which showed a series of checks written to the couple and deposited in their personal accounts. They had slowly and systematically drained the assets from the company. Whether this was their intent when they started the business or not, the result was the same as a bust-out. They had siphoned off all the assets from the company. Now a less conscientious credit manager might have written this account off to bad debt but not this one. His collection agency thought that the principles might have assets. Despite the fact that the vendor had not gotten a personal guarantee, the vendor went after the husband and wife personally in court. He was able to do this because the couple owned 100% of the company. The paper trail led back to the company. A background search turned up personal assets. For example, a local title search uncovered the fact that the couple owned property while a lien search uncovered no mortgage. They owned their home free and clear.
QUESTION:
1. What is the introduction in the given case.
2. What is the background
3. Evaluation of the case
4. Proposed Solution
5. Recommendation
Related Book For
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
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