Discussion:
(Reporting of Subsequent Events) In June 2017, the board of directors for McElroy Enterprises Inc. authorized the sale of $10,000,000 of corporate bonds. Jennifer Grayson, treasurer for McElroy Enterprises Inc., is concerned about the date when the bonds are issued. The company really needs the cash, but she is worried that if the bonds are issued before the company's year-end (December 31, 2017) the additional liability will have an adverse effect on a number of important ratios. In July, she explains to company president William McElroy that if they delay issuing the bonds until after December 31 the bonds will not affect the ratios until December 31, 2018. They will have to report the issuance as a subsequent event which requires only footnote disclosure. Grayson expects that with expected improved financial performance in 2018, ratios should be better.
Answer the following questions:
1. What are the ethical issues involved?
2. Should McElroy agree to the delay?
Read and reply to one student's response. This is an automatic assigned peer review. Your reply should be a based on your analysis of the student's response (min. 100 words). You may comment on why you agree or disagree with the response, what sort of evidence supports or refutes their position, or you may ask questions related to their response.