How recording revenue in december would affect current ratio

Reference no: EM131323082

Accounting Assignment

Grant Film Products wishes to expand 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 1.50. Business has been good but not great. Expansion costs have brought the current ratio down to 1.40 on December 15. Rita Grant, owner of the business is considering what might happen if she reports a current ratio of 1.40 to the bank. One course of action for Grant is to record in December $10,000 of revenue that the business will earn in January of next year. The contract for this job has been signed.

Requirements: Journalize the revenue transaction, and indicate how recording this revenue in December would affect the current ratio. 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. Response should be no less than 250 words.

Reference no: EM131323082

Questions Cloud

Estimated present value of the cash inflows : Bruce Moneybags owns several restaurants and hotels near a local interstate. One restaurant, Beef and More, originally cost $1.8 million, is currently fully paid for, but needs modernized. The estimated present value of the cash inflows from the reno..

Establishments primarily engaged in manufacturing machinery : "Establishments primarily engaged in manufacturing machinery and equipment for use in oil and gas fields or for drilling water wells, including portable drilling rigs. Establishments primarily engaged in manufacturing offshore oil and gas well dri..

What is the project internal rate of return : A project has an initial requirement of $311,700 for fixed assets and $47,600 for net working capital. The fixed assets will be depreciated to a zero book value over the four-year life of the project and will be worthless at the end of the project. T..

Are competency models a waste : In consideration of Dalton's (1997) article "Are Competency Models a Waste?," what are your immediate thoughts? For example, if you were a training and development specialist for your own organization, how might you go about solving issues and/or ..

How recording revenue in december would affect current ratio : Requirements: Journalize the revenue transaction, and indicate how recording this revenue in December would affect the current ratio. Discuss whether it is ethical to record the revenue transaction in December.

Name three globalization trends : Name three Globalization trends and explain why a corporate decision-maker may need to be aware of these trends when making ethical strategy decisions.

Mathematical notation represents required rate of return : What is the required rate of return? What mathematical notation represents the required rate of return? If the RRR for an investor is 14% and the expected return of the investment is 16%, will the investor invest (or not) in the investment? Why? Expl..

Changing the game case analysis : In review of the Billy Beane: Changing the Game" case analysis, what, if any, are the potential problems with the HR strategies adopted by the Oakland A's?

Newly issued t-bill with annual rate of return : The investor invest in a newly issued T-bill with annual rate of return at 5%. With risk-aversion level at A=4, the investor is considering to hold a porfolio of stock ( Stock Expected return =0.25 SD=0.21) and risk-free asset, instead of holding the..

User Account

All Pages