The Discussion Board (DB) is part of the core of online learning. Classroom discussion in an online environment requires the active participation of students and the instructor to create robust interaction and dialogue. Every student is expected to create an original response to the open-ended DB question as well as engage in dialogue by responding to posts created by others throughout the week. At the end of each unit, DB participation will be assessed based on both level of engagement and the quality of the contribution to the discussion.

At a minimum, each student will be expected to post an original and thoughtful response to the DB question and contribute to the weekly dialogue by responding to at least two other posts from students. The first contribution must be posted before midnight (Central Time) on Wednesday of each week.

Two additional responses are required after Wednesday of each week. Students are highly encouraged to engage on the Discussion Board early and often, as that is the primary way the university tracks class attendance and participation.

The purpose of the Discussion Board is to allow students to learn through sharing ideas and experiences as they relate to course content and the DB question. Because it is not possible to engage in two-way dialogue after a conversation has ended, no posts to the DB will be accepted after the end of each unit.

Consider the following scenario:

Lucy Shafer wants to borrow $100,000 to expand her dog-breeding business. She is preparing a set of financial statements to take to the local bank with her loan application.

She currently has an outstanding loan from her uncle for $50,000. Lucy’s uncle is allowing her to borrow the money at a very low interest rate, and she does not have to make any principal payments for 5 years.

Due to the favorable terms of her loan from her uncle, Lucy has decided that it is not significant enough to disclose on her financial statements. Instead, Lucy has classified the $50,000 as contributed capital (equity), and the interest payments are included in miscellaneous expenses on the company’s income statement.

Respond to the following questions:

What are the effects of Lucy’s classification on the financial statements? (1 paragraph)

Are there any ratios that might be of concern to the local bank that will be misstated by Lucy’s actions? (1 paragraph)

Do you think Lucy’s actions are unethical?

Suppose Lucy’s uncle agrees to be a partner in the company and Lucy can afford to buy his share by repaying the $50,000 with interest. Does that change your opinion? (2 to 3 paragraphs)

Suggestions for Responding to Peer Posts

Compare and contrast your peer’s response to your own.

Were there any similarities or differences?

Were the reasons your peer gave for his or her decision supported well?

What statements would you use to refute his or her position?

In your own words, please post a response to the Discussion Board and comment on other postings. You will be graded on the quality of your postings.

ACCT311
UNIT 4 DB
MAIN POST

In today’s business world we fine many people like Lucy with the dilemma of being truthful and honest when it comes to their financial situation and many may decide to classified their loans or credits that have been giving to them as capital just in order of obtaining other loans from banks or other institutions.

If Lucy decides to classified her fifty thousand dollar loan as capital this will definitely help her obtain the loan because the bank will assume that she is a less of a risk because she does not have any loan or credit outstanding. There are a variety of ratios that the bank could use to evaluate Lucy’s business which are current ratio, quick ratio and debt to income ratio (Day, 2008)

which are all use to evaluate if a business or person has sufficient liquidity to meet future and current obligations and because of Lucy’s decision not to disclose the fifty thousand dollar loan all of these ratios will be affected.

I believe that Lucy’s decision to not disclose the fifty thousand dollars loan is definitely unethical because she is hiding the facts about the loan to the bank and when you apply for a loan or credit they are assuming that you are been honest and truthful.

Even if Lucy was able to pay the loan back to her uncle is still unethical because she manipulated the system by lying on her loan application in order to obtain the loan.

Furthermore if the bank fines out that Lucy lied on her loan application she could be subjected to penalties and even jail time for lying on her loan application which could carry penalties of 30 years in prison or one million dollars in fines (Banking Fraud, 2014).

Reference

Banking Fraud (2014). Retrieved from http://www.moneymatters101.com/banking/bfraud.asp Day, J. W. (2008). Business Ratios and Banks Loans. Retrieved from http://www.reallifeaccounting.com/pubs/Article_Theme_Business_Ratios_Bank_Loans.pdf