Title: Ethics Assessment #4 Answer Key
Course: SkillsCom BA 211 15.0 > Section: Credit Unit 4 Module 2

Ethics in Action

Case #1

- Requirement #1:  Jim wanted to report the highest amount of net cash from operating activities. Because both of these adjustments were negative, he was concerned about the reduction in overall operating cash flows.  He finally agreed with the accountant because he accepted the explanation that the net change in cash would not be reconciled, and thus, the mistake may be found out. At first, he may have thought that he could simply exclude certain negative adjustments not considering that the change in cash would not reconcile. Only when he realized this was the case did he accept the correct accounting treatment.

- Requirement #2:  Mathematically, the total cash proceeds from the sale of land could be placed in the operating activities section rather than in the investing section and the net change in cash would reconcile. However, this would be a violation of GAAP. Proceeds from the sale of long-term assets, such as land, must be properly included in the investing section of the statement of cash flows. Any gain or loss will be included as an adjusting item in the operating activities section, but the proceeds must be reported in the investing section. Further, the proceeds from sale must clearly be shown. It would be wrong to include the proceeds from sales as “other” operating cash provided.  Attempting to include the cash proceeds as “other” in the operating activities is unethical because the sole purpose is to provide misleading information. The rules of GAAP are designed to provide  reliable financial information for making informed decisions. Jim is proposing to violate GAAP in order to provide misleading information by attempting to overstate the cash provided from operating activities. This is unethical and wrong.