What amount is CAC required to pay each year on its bank loan? Use a loan amortization calculator, such as the one online at http://bretwhissel.net/amortization/, to determine how much of the annual payment relates to principal versus interest. Specifically, in the 2012 and 2013 fiscal years, how much principal is CAC required to repay? In what balance sheet category should the required 2013 principal repayment be reported? Has CAC reported the 2013 principal repayment correctly? What effect would changing CAC's reporting have on the external restrictions placed on the company?

 

How does CAC record revenue from its service contracts? How would signing a significant number of short-term service contracts (less than 12 months) near June 30 (CAC's year-end) affect the service revenue and accounts receivable reported at year-end? What effect would the timing of reporting revenue from these contracts have on the company's current assets and total assets, and on its current and debt-to-asset ratios? 

What would be a more appropriate policy for recognizing short-term contract revenue?

 

What method does GAAP require companies to use when determining depreciation? What method does CAC use? Is CAC's choice of method acceptable? Has CAC followed its stated method when calculating 2012 depreciation? Is there any aspect of CAC's depreciation practice that you should bring to the attention of Mr. Hasting? Why?