Reference no: EM132379457
Question : Case Study
In this case, students as the assistant accountant at Sugafree Ltd, a distributor of healthy snack foods. Sugafree has a large loan from ABC Bank, and part of the loan agreement stipulates that the company must maintain a Cash at Bank account balance of at least $75 000, reviewed monthly by the bank manager.
At 30 June assistant accountant report to the accountant, Mandy Sherlock, that the cash balance is only $50 000. Mandy is concerned and instructs assistant accountant to keep the cash receipts records open for one more day. She explains that if Sugafree reports this cash balance to the bank, the company will default on the loan agreement and the bank may foreclose on the loan and require full repayment. The company could be forced into liquidation and all employees will lose their jobs.
Mandy's friend Peter Holmes is the accountant at Fantastic Foods, one of Sugafree's largest customers. She says she will ring Peter and get him to send through a cheque for $35 000 (in part payment of Fantastic Foods' account) dated 30 June, which you will receive tomorrow, 1 July.???????
Mandy instructs assistant accountant to include this cheque in the cash balance so that Sugafree does not have any issues with ABC Bank due to falling below the $75,000 limit at 30 June.
In the capacity as a professional accountant, how would assistant accountant personally handle this situation - what would be the first step, second step, etc?
Would assistant accountant speak to anyone about this situation?
Please consider the Code of Ethics for Professional Accountants?
What would assistant accountant do to resolve this situation?
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