help meeee

timer Asked: Dec 14th, 2015

Question description

Case 3:

Salem would like to expand his business and has borrowed  $100,000. As a condition for making this loan, the bank requires that the business maintain a current ratio of at least 1.5.

The expansion costs have brought the current ratio to 1.4 on Dec. 15. To avoid this decrease in current ratio Salem record in December $10,000 of revenue that the business will earn in January of next year. The contract for this job has been sign.


1-  Journalize the revenue transaction, and indicate how recording this revenue in December would affect the current ratio.

2-  Discuss whether it is ethical to record the revenue transaction in December. Identify the accounting principle relevant to this situation, and give the reasons underlying your conclusion.

Case 4:

Khaled company facing its first annual net loss as the end of the year approached and he is under the pressure from the company’s creditors to report positive net income for the year. He told the controller to record the $ 10,000 incoming bank loan as a revenue instead of a loan. That would nudge the company’s income into positive territory for the year, and then, he said,  the entry could be corrected in January when the loan was repaid.


1-  How this action affect the year-end income statement? How would it affect the year-end balance sheet?

2-  If you were one of the company’s creditors, how would this fraudulent action affect you?

Tutor Answer

(Top Tutor) Studypool Tutor
School: Boston College
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors