Bank to acquire large tract of land for future expansion

Assignment Help Financial Accounting

Reference no: EM131253577

Keyzer Soze LTD requested a sizable loan from First American Bank to acquire a large tract of land for future expansion. Keyzer reported current assets of $6,000,000 ($1,500,000 in cash) and current liabilities of $3,575,000. First American denied the loan request for a number of reasons, including the fact that the current ratio was below 2:1. When Keyser was informed of the loan denial, the controller of the company immediately paid $1,250,000 that was owed to several trade creditors. The controller then asked First National to reconsider the loan application.

Required:

a) Discuss whether of not you would recommend that First Americal Bank approve the revised loan request.

b) Explain why $5,000 revenue collected in advance for service to be provided would be recorded as a debit to cash and a credit to a liability account.

Reference no: EM131253577

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