Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Specialty Metals, Inc., a fast-growing company that makes metals for equipment manufacturers, has an $ 800,000 line of credit at its bank. One section in the credit agreement says that the ratio of cash flows from operations to interest expense must exceed 3.0. If this ratio falls below 3.0, the company must reduce the balance outstanding on its line of credit to one- half the total line if the funds borrowed against the line of credit exceed one- half of the total line. After the end of the fiscal year, the company's controller informs the president: "We will not meet the ratio requirements on our line of credit in 2010 because interest expense was $ 1.2 million and cash flows from operations were $ 3.2 million. Also, we have borrowed 100 percent of our line of credit. We do not have the cash to reduce the credit line by $ 400,000." The president says, "This is a serious situation. To pay our ongoing bills, we need our bank to increase our line of credit, not decrease it. What can we do?" "Do you recall the $ 500,000 two- year note payable for equipment?" replied the controller. "It is now classified as ‘Proceeds from Notes Payable' in cash flows provided from financing activities in the statement of cash flows. If we move it to cash flows from operations and call it ‘Increase in Payables,' it would increase cash flows from operations to $ 3.7 million and put us over the limit." "Well, do it," ordered the president. "It surely doesn't make any difference where it is on the statement. It is an increase in both places. It would be much worse for our company in the long term if we failed to meet this ratio requirement."
What is your opinion of the controller and president's reasoning? Is the president's order ethical? Who benefits and who is harmed if the controller follows the president's order? What are management's alternatives? What would you do?
The automatic lane-cleaning machine. Thecost of repairing the component is $1,850. What is the totalrecorded cost of the automatic scorekeeping equipment?
In the current year, Hanna Company reported warranty expense of $183,000 and the warranty liability account increased by $28,000. What were warranty expenditures during the year?
Mark paid $40,000 in German income taxes related to the $100,000 in branch income. Assuming a U.S. tax rate of 35%, what is Mark's U.S. tax liability after any allowable foreign tax credits?
fab corporation will need 200000 canadian dollars c in 90 days to cover a payable position. currently a 90-day call
What is the adjustment to record the accrued fees? Indicate each account affected, whether the account is increased or decreased, and the amount of the increase or decrease.
glaser health products of ranier falls georgia is organized functionally into three divisions operations sales and
mcdaniel company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct
An investor recently purchased a corporate bond which yields 9 percent. The investor is in the 36 percent combined federal and state tax bracket. What is the bond's after-tax yield?
a popular product of loring glassworks is a hand-decorated vase. the companys standard cost system calls for .75 hours
the face amount of the bonds. Green had a basis of $120,000 in the land. What are the tax consequences of this land transfer to Green Corporation and to Orange Corporation?
which of the following is not a mechanism that helps aligning management and owner interests?a possibility of a hostile
Explain why it might make sense for this company to award bonuses based on sales growth. How might this approach encourage poor business decisions when compared to a bonus plan tied to earnings?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd