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:

4. Require officers who have borrowed money from the company to repay the amounts owed at December 31. This would convert into cash the notes

receivable from officers, which now appear in the balance sheet as noncurrent assets. The loans could be renewed immediately after year-end.

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