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Article: Phillips, Fred. Evaluating Financial Results at Graphic Apparel Corporation (GAC): The Impact of Accounting...

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Accounting

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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