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Eugene Wright is CFO of Caribbean Cruise Lines. The company designs and manufactures luxury boats. It's near year-end, and Eugene is feeling kind of queasy. The economy is in a recession, and demand for luxury boats is way down. Eugene did some preliminary liquidity analysis and noted the company's current ratio is slightly below the 1.2 minimum stated in its debt covenant with First Federal Bank. Eugene realizes that if the company reports a current ratio below 1.2 at year-end, the company runs the risk that First Federal will call its $10 million loan. He just cannot let that happen.
aribbean Cruise Lines has current assets of $12 million and current liabilities of $10.1 million. Eugene decides to delay the delivery of $1 million in inventory purchased on account from the originally scheduled date of December 26 to a new arrival date of January 3. This maneuver will decrease inventory and accounts payable by $1 million at December year-end. Eugene believes the company can somehow get by without the added inventory, as manufacturing slows down some during the holiday season.
How will the delay in the delivery of $1 million in inventory purchased on account affect the company's current ratio on December 31? Provide supporting calculations of the current ratio before and after this proposed delivery delay.
Is this practice ethical? Provide arguments both for and against.
On December 31st, 2003, the Merchant Bank enters into a debt restructuring agreement with Shrek Company, which is now experiencing financial trouble. The bank agrees to restructure a 10%, issued at par, $1,000,000 note receivable by the following ..
zeeb corporation produces and sells a single product. data concerning that product appear belowper unitpercent of
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On July 1, 1998, when Betty was 65 years old, she purchased an annuity contract for $108,000. The annuity was to pay Betty $9,000 on June 30 each year for the remainder of her life. Betty died on March 31, 2011. What are the effects of the annuity..
How does a parent company account for a subsidiary organization in the years that follow the creation of a business combination?
Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days' sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its fin..
Silvia receives all 1,000 shares of Leaf Corporation stock worth $50,000 and a two-year note with a $5,000 FMV. What is the amount and character of the recognized gain or loss?
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Question - If the price of labor goes up by 25% this makes the model 5200 even more attractive since it currently has a significantly lower labor cost per unit than model 2600.
What is the recognized gain or loss?
What is the total stockholders' equity based on the following account balances? Common Stock
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