10. What are the requirements set out by the covenants on the bank loan?

There are a few ratios that we need to calculate. They want our current ratio to be at least 1.5 and they want our long-term liabilities to equity ratio to be under 1.2. Dividends may not be distributed unless earnings exceed five times interest.Loans may not be made either to Mr. Ballard or to Mr. Riley.Salary increases for Mr. Ballard and Mr. Riley must be approved by the bank. We are in compliance with all of those things. In fact our current ratio is about 4.7.

1.Develop a 1 - 2 page, double-spaced paper for each issue that does the following:

Issue: Succinctly state the accounting issue.

Rule: Using your research of authoritative accounting sources, briefly identify and explain the authoritative rule.

Analysis: Apply the facts of the case study to the rule and provide an in-depth analysis based on the issue. Your analysis should also include supporting schedules, calculations, and/or correcting journal entries.

Conclusion: State your conclusion(s) based upon the results of your analysis and indicate any changes to the financial statements and disclosure notes resulting from the rule.