The accounts receivable balance for New Wave Company includes a $56,000 loan to Tom Morrow, the company president. Tom borrowed the money from New Wave 18 months earlier for a down payment on a new home. Tom has orally assured Manny, the treasurer and vice president of finance, that he will pay off the loan within the next year. Because Tom is the company president, Manny treats the amount due as a accounts receivable. In addition, Manny knows that the bank will consider a large balance in accounts receivable more favorably than a large personal loan to a single individual. Manny reported the $56,000 in the same manner on the preceding years balance sheet.

1. Is Manny behaving ethically by reporting the loan to Tom as an account receivable? Why?
2. Who will be affected by Mannys decision?
3. How should Manny handle this situation and how should the loan be reported on the balance sheet?