You are the accountant for Spaedy Company and are preparing the financial statements for 2007. Near the

Question:

You are the accountant for Spaedy Company and are preparing the for 2007. Near the end of 2007, Spaedy Company loaned its president $100,000 (a material amount) because she was having financial difficulties. The note was properly recorded as a note receivable by Spaedy Company. You are unsure of how to classify this note on the 2007 ending and ask the president when the note is due. She replies, “We never really set a due date; I might repay it in 2008 or maybe in a couple of years when I get more financially secure. It would be best to classify this note as a current asset in the usual manner because that will increase our working capital and current ratio, which will make our creditors and stockholders happy.”

Required
From financial reporting and ethical perspectives, what do you think of the president’s suggestion?

Financial Statements
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