Opinion ID: 1506485
Heading Depth: 1
Heading Rank: 3

Heading: Accounts of the Doctors Gross

Text: Toward the end of 1935 the Bankers Company bought for $2,000 accounts of the face value of $8,023 against the patients of two doctors named Gross. Shortly thereafter, at the instance of Gaffeney, White entered in the journal of the company an increase in value of these accounts of $5,020.12 which, together with the amount paid, amounted to 87½% of their face. In his financial statement for the year 1935, at page 14 of the prospectus of August, 1936, this write-up appeared as Profit on purchase of accounts receivable, and on page 13 the reserve of 12½% appeared as a deduction from Other accounts receivable purchased outright. This would have been wholly deceptive except for a note on page 16, which gave Gaffeney as authority for the statement that he had already established the collectibility of the accounts receivable purchased outright to the exent of 87½% of their face value. Apparently accountants differ as to entering unrealized profits, and we do not say that it was fraudulent so to state them; but White was a very credulous accountant if he believed that accounts bought for only a quarter of their face really had a value of seven-eighths of it.