The Peace River Drilling Company (PRD) is a private company, and has just completed its...
70.2K
Verified Solution
Link Copied!
Question
Accounting
The Peace River Drilling Company (PRD) is a private company, and has just completed its first year of operations. The company drills oil and gas wells. Because rigs are easier to move across dry or frozen ground, most of the drilling done by PRD occurs in the summer and winter seasons. PRD has a part-time accountant who has been responsible for recording most of the companys transactions and he is about to prepare the draft financial statements and needs some advice from you.
The company has four major types of tangible assets: land, buildings, drilling rigs, and furniture. PRD has also just developed a new drill bit and has obtained a patent for it because of its unique design. The company has entered into a contract with a drill bit manufacturer that gives the manufacturer the right to use the unique design when producing its products in exchange for a royalty from the sale of these drill bits. The agreement expires in five years. The company plans to do a public issue of shares sometime in the next three years.
1. If PRD wanted to obtain a bank loan, which type of asset would the bank probably want to use for security on the loan? Which type of asset is least likely to be used as security? Why?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
