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Author Question: Vestige, Inc needs another loan from a bank in order to pay its bills. In order to improve its ... (Read 158 times)

kshipps

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on: Jul 5, 2018
Vestige, Inc needs another loan from a bank in order to pay its bills. In order to improve its chances of getting another loan, it reports its ten-month note payable as a long-term liability.
 
  Discuss the treatment of this note payable including the financial statement presentation and the effect on the current ratio. Discuss the ethical issue with Vestige's treatment of this note payable.
  What will be an ideal response?

Question 2

The payroll register is a key source of information for computing employer payroll taxes.
 a. True
   b. False
   Indicate whether the statement is true or false


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millet

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Reply #1 on: Jul 5, 2018
Answer to Question 1

Vestige, Inc. is unethical in misrepresenting its financial position. The note is a current liability, not a long-term liability, because it is due within one year. Since its current liabilities are understated, the current ratio will look more favorable than it should. A potential creditor will be misled and may decide to lend the money only to find out later that the company does not have the ability to pay back its loans when due.

Answer to Question 2

True


kshipps

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Reply #2 on: Jul 5, 2018
Thank you :)


millet

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Reply #3 on: Jul 5, 2018
Happy to help you


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