ETHICS CASE You are the assistant controller in charge of general ledger accounting at Hallasan Bottling. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at ₩200,000 or more, as reported monthly (amounts in thousands). At June 30, the cash balance is ₩80,000, which you report to Yoo Yun, the financial vice president. Yoo excitedly instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Yoo says, “If we don’t get the cash balance over ₩200,000, we’ll default on our loan agreement. They could close us down, put us all out of jobs!” Yoo continues, “I talked to Oconto Distributors (one of Hallasan’s largest customers) this morning. They said they sent us a check for ₩150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!” Instructions Who will suffer negative effects if you do not comply with Yoo’s instructions? Who will suffer if you do comply? What are the ethical considerations in this case? What alternatives do you have? (List all possible alternatives with the consequences – either positive or negative) Answers should be within 150 to 350 words for the entire case.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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ETHICS CASE

You are the assistant controller in charge of general ledger accounting at Hallasan Bottling. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at ₩200,000 or more, as reported monthly (amounts in thousands).

At June 30, the cash balance is ₩80,000, which you report to Yoo Yun, the financial vice president. Yoo excitedly instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Yoo says, “If we don’t get the cash balance over ₩200,000, we’ll default on our loan agreement. They could close us down, put us all out of jobs!” Yoo continues, “I talked to Oconto Distributors (one of Hallasan’s largest customers) this morning. They said they sent us a check for ₩150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”

Instructions

Who will suffer negative effects if you do not comply with Yoo’s instructions? Who will suffer if you do comply?
What are the ethical considerations in this case?
What alternatives do you have? (List all possible alternatives with the consequences – either positive or negative)

Answers should be within 150 to 350 words for the entire case.

Definition Definition Financial journal in which only cash-related transactions are recorded. Cash transactions are posted chronologically in the cash book, which is also called a subsidiary book. All the cash receipts are recorded on the debit side and all the cash payments are recorded on the credit side. An important point to remember is that the cash book never shows a credit balance; only a debit balance is shown in the cash book.

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