Question - Shake Corporation has several current notes receivable on its year-end balance sheet. While collection seems certain, it may be delayed beyond one year. Because of this, the controller wants to re-classify these notes as non-current. Shake's treasurer also thinks that collection will be delayed but does not favor re-classification because this will reduce the current ratio from 1.5:1 to .8:1. This reduction in current ratio is detrimental to company prospects for securing a major loan.
a. Should the controller re-classify the notes? Give your reasons.
b. Does the treasurer's position pose an ethical dilemma for the controller? Explain your answer.