Moss Exports is having a bad year. Net income is only $60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss’s accounts receivable are ballooning. The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company’s financial statements. Moss’s bank closely examines cash flow from operating activities. Daniel Peavey, Moss’s controller, suggests reclassifying the receivables from the slow-paying clients as long-term. He explains to the board that removing the $80,000 increase in accounts receivable from current assets will increase net cash provided by operations. This approach may help Moss get the loan.
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? Unethical?
Instructions: Your initial response should be no less than 200 words. Reply to at least two of your classmates. Replies to classmates should be a minimum of 100 words and include direct questions. In-text citations and references may be in APA format but is NOT required. Refer to the Forum Grading Rubric below for additional guidelines.
Discussion Quality (40 points available)Questions answered completely (i.e. including Instructor follow-up) (14 pts.)14Posts on topic and demonstrated analysis (16 pts.)16Original post meets minimum word requirement (10 pts.)10Total40 Participation Guidelines (26 points available): Initial post submitted before the deadline (14 pts.)14Posts made on at least one day (8 pts.)8At least two responses to classmates (4 pts.)4Total26 Clarity and Organization of Writing (28 points available): Posts were organized (6 pts.)6References were used with proper attribution (8 pts.) 8No spelling or grammatical errors (14 pts.)14Total28 Professional & Netiquette (6 points available): Respectful (2 pts.)2Appropriate (2 pts.)2Professional Tone (2 pts.) 2Total6TOTAL POINTS EARNED (100 pts.)100