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