A series of substantial net losses from operations has resulted in the following balance sheet drafted by the controller of Nobis, Ortho & Parr LLP:
Concerned about the partnership’s high debt-to-equity ratio of 470.6% ($800,000 $170,000 470.6%), the partners consult with Jack Julian, CPA, controller of the partnership, who is a member of the AICPA, FEI, and IMA (see Chapter 1), regarding the propriety of converting partner Ortho’s capital deficit to an account receivable. Ortho shows Julian a personal financial statement showing net assets of more than $400,000; Ortho points out that the bulk of her assets are in long-term investments that are difficult to liquidate to obtain cash for investment in the partnership. Partner Ortho is willing to pledge high-grade securities in her personal portfolio of investments to secure the $120,000 amount.
Instructions
May Jack Julian ethically comply with the request of the partners of Nobis, Ortho & Parr LLP? Explain.
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