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Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased...

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Accounting

Adventures in Wild Life conducts tours of wildlife reservesaround the world. They have recently purchased a new lodge in Adak,Alaska, utilizing a 4% mortgage from Bank of Alaska. As part of theagreement they must provide an annual report showing they areachieving a current ratio of 1.2 or better. In order to ensure theyachieve this ratio, the CEO requested the CFO to reclassify thelong-term debt investments into brokerage accounts to allow them tosell them soon. The adjustments were done knowing the company wasnot planning on selling these long-term investments. The economytook a downturn and the business saw revenues drop more than60%.

  1. Explain how the move of long-term investments to brokerageinvestments would change the financial statements and how thismovement would affect the current ratio.
  2. What information on the financial statements should have shownthe bank of this movement?
  3. Determine if there was fraud in this movement and the type offraud.

Answer & Explanation Solved by verified expert
3.9 Ratings (647 Votes)
Long term investments are held with the purpose of holding them for a period greater than 1 year They are generally valued at cost and not revalued unless there is permanent fall    See Answer
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