Article: Phillips, Fred. Evaluating Financial Results at Graphic Apparel Corporation (GAC): The Impact of Accounting...
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Article: Phillips, Fred. Evaluating Financial Results at Graphic Apparel Corporation (GAC): The Impact of Accounting Policies. American Accounting Association.
EXHIBIT 1 (continued)
Question: List the Journal Entries that need to be taken and determine what Nicki will need to do ensure she complies with the loan covenant. A table is provided for your convenience.
If all the proposed changes are made, how would GACs current ratio change?
Please note: Do not simply answer the questions, make recommendations to Nikki. (Be sure to consult the grading rubric.)
Current Assets
With Changes
Current Liability
With Changes
Current Ratio
As Presently Reported
$ 61,000.00
$ 61,000.00
$ 45,180.00
$ 45,180.00
1.35015494
Greater than 1! Looks Good
Uncollectible Receivable adj
$ -
Custom T revenue adj.
$ -
Sales Returns adj.
$ -
Inventory write-down 1
$ -
Inventory write-down 2
$ -
Total Adjustment
Cash or other Current Assets needed to get current ratio to 1.0
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