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You are the CFO of Diversi?ed Industries. Diversi?ed has suffered through 4 or 5 tough years. This has deteriorated its ? financial condition to the point that Diversi?ed is in danger of violating two loan covenants related to its largest loan, which is not due for 12 more years. The loan con-tract states that if Diversi?ed violates any of these covenants, the loan principal becomes immediately due and payable. Diversi?ed would be unable to make this payment, and any additional loans taken to repay this loan would likely be at higher rates, forcing Diversi?ed into bankruptcy. An investment banker suggests forming another entity (called ‘‘special purpose entities'' or SPE) and transferring some debt to this SPE. Structuring the SPE very carefully will have the effect of moving enough debt off Diversi?ed's balance sheet to keep the company in compliance with all its loan covenants. The investment banker assures you that accounting rules permit such accounting treatment. Required: How do you react to the investment banker?
At one time, Circle K was the second-largest convenience store chain in the United States. At its peak, Circle K operated 4,685 stores in 32 states. Circle K's rapid expansion was
Corporation Tax This is the tax payable by companies on their trading activities of a given financial period. The standard doesn’t give the guidelines on how this tax should be
Cash flow Estimation and Capital Budgeting XYZ Electronics, Inc. is a manufacturer of eBook Readers. Its current model is selling excellently. However, in order to cope with t
Tampa Foundry began operations during the present year, manufacturing several products for industrial use. One such product is light-gauge aluminum, which the company sells for $36
On November 1, 2011, Leetch Ltd. borrows $400,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note needs equal total payments every year on Oc
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Craig's Cars has assets of $4,550 and stockholders' equity of $3,200. What is the amount of liabilities? What is the amount of claims?
During FY 2014, the voters of Surprise County approved construction of a $21 million police facility and an $11 million fire station to accommodate the county's population growth.
A lawn care company started business on January 1, 2012. The company billed clients $105,000 for lawn care services completed in 2012. By December 31, the company had received $84,
Presented below are condensed financial statements adapted from those of two actual companies competing as the primary players in a specialty area of the food manufacturing and dis
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