Absolute Entertainment (ET) Agency is having a bad year. Net income is only $50,000. Also. two important clients are falling behind in their payments to Absolute, and the agency's accounts receivable are ballooning. The company desperately needs a loan. The Absolute ET board of directors is considering ways to put the best face on the company's financial state- ments. The agency's bank closely examines cash flow from operations. Rachel McPherson, Absolute ET's controller. suggests reclassifying as long-term the receivables from the slow- paying clients. She explains that removing the $70.000 rise in accounts receivable will increase cash flow from operations. This may help Absolute ET get the loan. Required 1. Using only the amounts given, compute net cash inflow from operations both with and without the reclassification of the receivables. Which way makes Absolute ET look better? 2. Under what condition would the reclassification of the receivables be ethical? Unethical?