Sweety Inc. manufactures candy and sells only to retailers. It is not a publicly owned company and its financial statements are not audited. But the company frequently must borrow money. Its creditors insist that the company provide them with unaudited financial statements at the end of each quarter.

In October, management met to discuss the fiscal year ending next December 31. Due to a sluggish economy, Sweety Inc. was having difficulty collecting its accounts receivable, and its cash position was unusually low. Management knew that if the December 31 balance sheet did not look good, the company would have difficulty borrowing the money it would need to boost production for Valentines Day.

Thus, the purpose of the meeting was to explore ways in which Sweety Inc. might improve its December 31 balance sheet. Some of the ideas discussed are as follows:

7. On December 31, draw a large check against one of the companys bank accounts and deposit it in another of the companys accounts in a different bank. The check wont clear the first bank until after year-end. This will substantially increase the amount of cash in bank accounts at year-end.

Instructions: Separately evaluate each of these proposals. Consider ethical issues as well as accounting issues.