Question

1. Using only the amounts given, compute net cash provided by operations, both without and with the reclassification of the receivables. Which reporting makes Moss look better? 2. Under what condition would the reclassification of the receivables be ethical? 3. Unethical?

Answer 1

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Using only the amounts given, compute net cash provided by operations, both without and with the reclassification of the receivables. Which reporting makes Moss look better?Reclassifying the accounts payable to long-term receivables would essentially make the reporting look better. Cash flow from operations would go up by $80,000 only because with the reclassification it will look as if the company collected the $80,000. However, the over-all effect will still leave cash flow with a zero-dollar balance and transfer the balance into long term receivables account. 2.Under what condition would the reclassification of the receivables be ethical? Unethical?The only way the reclassification of the receivables would be ethical is if the company were to make new agreements with the overseas companies that are