Should the notes payable be reclassified? Michael Reinstein had just left the office of his supervisor, Scott Medley. The supervisor had mentioned that Michael should reclassify a cash receipt from...

Should the notes payable be reclassified?

Michael Reinstein had just left the office of his supervisor, Scott Medley. The supervisor had mentioned that Michael should reclassify a cash receipt from issuance of long-term notes payable as a short-term notes payable. Scott had shared with Michael that the chairman of the Board of Directors was placing intense pressure on him to report a positive cash flow from operating activities. Michael knew that if the company reclassified the notes payable, the business would no longer report the receipt in the financing activities section of the statement of cash flows. Instead, it would be shown as an increase in current liabilities resulting in a positive cash flow from operating activities. What should Michael do?