Prepare a report on the accounting implications of the issues. When the accounting for an individual transaction has not been specified, you should indicate how it should be accounted for and the impact that the accounting would have had on the key metric(s).

Please base on the CPA Guidlines

SFCs bank operating loan in the amount of $200 million is well within its maximum of $240 million. The loan agreement calls for a maximum debt-to-equity ratio of 2:1, where debt is defined as monetary liabilities. Failure to meet the loan covenant would cause the operating loan to become payable within 30 days. On the May 31, Year 7, interim financial statements, SFC meets the restriction because its debt is $1,490 million while its shareholders equity is $780 million. SFCs consolidated income before tax was $147 million for the 11 months ended May 31, Year 7. SFC hopes to maintain its recent trend of reporting a minimum before-tax return on shareholders equity of 20%.