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Accounting

Problem:

Suppose XYZ company was closing its books for the quarter in two weeks. The credit agreement with the bank requires a ratio of (1) income available for fixed charges over (2) fixed charges of 1.75 to 1.00. XYZ is in danger of missing the ratio, violating the covenant.

Required:

Question: Which of the following is the best method of meeting the covenant?

Leave the books open several days into the next quarter.
Report this quarter's expenses in next quarter.
Delay repairs and maintenance until next quarter.
Change accounting estimates

Note: Provide support for your rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91164614

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