c ocash tlows, along J ie statement. Accounting Ethics Case Due to an economic r

Question

c ocash tlows, along J ie statement. Accounting Ethics Case Due to an economic recession, Ant on Corporation faces severe cash roblems. Management forecasts that payments to some suppliers will have to be delayed for months. Jay Newton, controller, has asked his staff for suggestions on selecting the suppi ers for which payments will be delayed. That's a fairly easy decision," observes Tim Haslem. "Some suppliers charge interest if nt is late, but others do not. We should pay those suppli me the ones that do not charge interest. If we do this, the savings in interest charges will be quite ers that charge interest and delay payments to I disagree," states Tara Wirth. "Tha lay payments only to suppliers who don't charge interest for late payments. Most suppliers in that category are ones we have dealt with for years; selecting these suppliers would be taking advantage of the excellent relationships we have developed over the years. The fair thing to do is to make pro- rata payments to each supplier." t position is too bottom line, oriented. It's not fair to de- 0 8 "Well, making pro-rata payments to each supplier means that all our suppliers will be upset because no maintain good relations with our long-term suppliers; we should pay them currently and delay pay ments to our newer suppliers. The interest costs we end up paying these newer suppliers is the price we must pay to keep our long-term relationships solid." Required Which suppliers should Jay N

Explanation / Answer

Answer:

All the suggestions given in the question for payments to suppliers have their own possitives and negatives. However, as far as Accounting Ethics are considered, the company shall categorize the outstanding suppliers into suppliers with undisputed and disputed amounts. Then, for undisputed category a ageing of suppliers list shall be prepared. The agewise older suppliers with undisputed amounts shall be paid first. However, the company may consider the suggestions of subordinates to some extent to maintain good and healthy business relations with all the suppliers. Also, if required the company can go for long or short term borrowings to fulfil its working capital requirementsand pay off to its suppliers. Also, an analysis on collection from debtors shall be done to assess the need to sppedify the collection from debtors to satify payments to suppliers.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.