Gena Schmitt and Riverside Bottling Ethics Issue
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You are the assistant controller in charge of general ledger accounting at Riverside Bottling Company. 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.
At June 30 the cash balance is $80,000, which you report to Gena Schmitt, the financial vice president. Gena 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. Gena says, "If we don't get that cash balance over $200,000, we'll default on our loan agreement. They could close us down, put us all out of our jobs!" Gena continues, "I talked to Oconto Distributors (one of Riverside'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
(a) Who will suffer negative effects if you do not comply with Gena Schmitt's instructions? Who will suffer if you do comply?
(b) What are the ethical considerations in this case?
(c) What alternatives do you have?
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Solution Summary
The 601 word solution responses to each question with a thoughtful and complete answer. The final question is answered with four possible choices to alleviate a future problem of this type.
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(a) Who will suffer negative effects if you do not comply with Gena Schmitt's instructions? Who will suffer if you do comply?
As an employee, the assistant controller has very little to say about a decision made by the financial vice president. Nothing will be gained by arguing and spouting policy to the vice president because she already understands the issue very well. If you do disagree, you are apt to reprimanded or worse yet, fired.
The true negative effects are the realization that the ethics of the company have been compromised by this action, and you (the assistant controller) will have to decide personally whether that type of action is acceptable to your standards. If you can live with it, then no harm done. If not, then start looking for another job.
Gena, the vice president, obviously reports to someone higher and she ...
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