Your client, Summerford, Inc., has a debt agreement with Valley City Bank that includes a number of
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a. A current ratio of at least 1.5 to 1 must be maintained at year-end.
b. No dividends may be paid in years in which there is a net loss. When there is net income, no more than one-half of the net income may be paid out in dividends.
c. The accounts receivable and inventory serve as security on the loan.
d. The total of the president’s and vice president’s salaries may not exceed $800,000 during the duration of the loan.
e. Monthly payments as per the agreement are due by the 10th of the following month.
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Principles of Auditing and Other Assurance Services
ISBN: 978-0078025617
19th edition
Authors: Ray Whittington, Kurt Pany
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