Wesley Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The boards policy requires that, for this dividend to be declared, net cash provided by operating activities as reported in Wesleys current years statement of cash flows must exceed $1 million. President and CEO Samuel Gunkles job is secure so long as he produces annual operating cash flows to support the usual dividend.

At the end of the current year, controller Gerald Rondelli presents president Samuel Gunkle with some disappointing news: The net cash provided by operating activities is calculated by the indirect method to be only $970,000. The president says to Gerald, We must get that amount above $1 million. Isnt there some way to increase operating cash flow by another $30,000? Gerald answers, These figures were prepared by my assistant. Ill go back to my office and see what I cando. The president replies, I know you wont let me down, Gerald.Upon scrutiny of the statement of cash flows, Gerald concludes that he can get the operating cash flows above $1 million by reclassifying a $60,000, 2-year note payable listed in the financing activities section as Proceeds from bank loan$60,000. He will report the note instead as Increase in payables$60,000 and treat it as an adjustment of net income in the operating activities section. He returns to the president, saying, You can tell the board to declare their usual dividend. Our net cash provided by operating activities is $1,030,000. Good man, Gerald! I knew I could count on you, exults the president.

(a) Was there anything unethical about the presidents actions? Was there anything unethical about the controllers actions?