Raffies Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffies bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffies pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffies Kids should report the mortgage on its balance sheet.

1. What is the ethical issue?

2. What is the reason for your recommendation?