Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased a new lodge in Adak, Alaska, utilizing a 4% mortgage from Bank of Alaska. As part of the agreement they must provide an annual report showing they are achieving a current ratio of 1.2 or better. In order to ensure they achieve this ratio, the CEO requested the CFO to reclassify the long-term debt investments into brokerage accounts to allow them to sell them soon. The adjustments were done knowing the company was not planning on selling these long-term investments. The economy took a downturn and the business saw revenues drop more than 60%. 1. Explain how the move of long-term investments to brokerage investments would change the financial statements and how this movement would affect the current ratio. 2. What information on the financial statements should have shown the bank of this

Adventures in Wild Life conducts tours of wildlife reserves around the world. They have recently purchased a new lodge in Adak, Alaska, utilizing a 4% mortgage from Bank of Alaska. As part of the agreement they must provide an annual report showing they are achieving a current ratio of 1.2 or better. In order to ensure they achieve this ratio, the CEO requested the CFO to reclassify the long-term debt investments into brokerage accounts to allow them to sell them soon. The adjustments were done knowing the company was not planning on selling these long-term investments. The economy took a downturn and the business saw revenues drop more than 60%. 1. Explain how the move of long-term investments to brokerage investments would change the financial statements and how this movement would affect the current ratio. 2. What information on the financial statements should have shown the bank of this

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Adventures in Wild Life conducts tours of wildlife reserves around the world. They have
recently purchased a new lodge in Adak, Alaska, utilizing a 4% mortgage from Bank of
Alaska. As part of the agreement they must provide an annual report showing they are
achieving a current ratio of 1.2 or better. In order to ensure they achieve this ratio, the
CEO requested the CFO to reclassify the long-term debt investments into brokerage
accounts to allow them to sell them soon. The adjustments were done knowing the
company was not planning on selling these long-term investments. The economy took a
downturn and the business saw revenues drop more than 60%.
uS
1. Explain how the move of long-term investments to brokerage investments would
change the financial statements and how this movement would affect the current
pa
Da
ratio.
2. What information on the financial statements should have shown the bank of this
Jo
movement?
3. Determine if there was fraud in this movement and the type of fraud.

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