Accounting For Securitization Of Receivables Under

Convertible debt and debt with stock warrants differ in that: (1) if the market price of the stock increases sufficiently, the issuer can force conversion of convertible debt into common stock by calling the issue for redemption, but the issuer cannot force exercise of the warrants; (2) convertible debt may be essentially debt, whereas debt with stock warrants is debt with the additional right to acquire equity; and (3) the conversion option and the convertible debt are inseparable and, in the absence of separate transferability, do not have separate values established in the market; whereas debt with detachable stock warrants can be separated into debt and the right to purchase stock, each having separate values in the market.

Creditors normally focus on the liquidity or solvency of the borrower in terms of current ratio and quick ratio, which indicate whether the company has enough working capital to cover the short-term debts. Myer will enter into a syndicated facility agreement to refinance the existing borrowings of the Myer Group. Besides, creditors are interested in the business risks the company might undertake, which indicate the possibility that the company might be unable to pay back the long-term liability in the future. From this point, the expectation on high return on investment and high profitability in the long run make the creditor’s interest aligned with shareholders’ value.

Overall. The FASB Codification Topic 320: Investments-Debt and Equity Securities is included under the financial statement asset section and offers guidance on investment instruments that represent either a creditor relationship (debt) or an ownership interest (equity) and provides standards for reporting such investments according to generally accepted accounting principles (GAAP) (FASB ASC 320-10-05-2, 2016).

Question 3: Describe and show the journal entries illustrating how the company accounts for the transfer of its accounts receivable to financial institutions. Is this accounting treatment reasonable? What are the key assumptions made under this approach? Do you agree with these assumptions?

This arrangement is known as a trouble debt restructuring. According to FASB ASC 470-60-20, “a restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider.” According to, FASB ASC 470-60-15-9, a troubled debt restructuring may include, but is not necessarily limited to, one or a combination of the following:

Both conditions must be met for the modification of the original debt to be considered a troubled debt Restructuring. According to ASC 40-60-55-7, if the debtor is currently in default of any of its debt than the debtor is experiencing financial difficulty. Private Getaways Co. defaulted on its debt instrument with Bank C that resulted in a cross default on the Original Debt held by Bank A and Bank B. Thus, the first condition is met. However, the second condition is not met due to ASC 40-60-55-10 stating, “A creditor is

Accounts receivable, or A/R, represent the cash due to a provider, or physician in this case, by insurance carriers or the insured patient. To reduce, or decrease, the total balance due, the payments are applied, or added, to the patients account. In other words, accounts receivable is cash that is owed to a company or practice by its debtors. Payments due from guarantors, patients, or payers is known to be accounts receivable. Getting paid in a manner that is timely and correct is something every practice wishes to achieve. They must do that by managing their accounts receivable. They also measure accounts receivable, or A/R, in days. To do this, you must calculate by dividing the total accounts receivable by the average charges daily for the practice. For example, "60 days in A/R" means that the practice is due payment for the equivalent of 60 days of work. Some practices handle these accounts receivable by:

Because liability is a company obligation it must be reported in to the balance sheet. Balance sheet is part of the financial statement that is essential for an investor. It is important to include the $4,000,000 out standing balance to the balance sheet as a part of the company liabilities. The detail of this loan should be disclose to the investor indicate that the company have additional line of credit of the $11,000,000 available. The company also needs to clarify that this line of credit is base on the 80% of the company account receivable. Disclosing this information clarified the company future outflow. This information will help investor to analyst and predict the company future earning and

In chapter 9, I learned that accounts receivable is the largest asset of an organization. Accounts receivable is money owed to an organization from patients and third parties for services provided. There are four steps to managing the revenue cycle, the first is to have policies and procedures for registration and admission of all patients. Second step is to have an accounting system that records charges. Third step is to have a medical record system that records accurate clinical information. The fourth step is to have a broad approved credit and collection policy. Charity care , bad debt, and self pay were briefly discussed in this chapter to ensure the difference of one another. Fair Debt Collection Practices Act, Truth in Lending Act, Fair

Based on the background information, Pinnacle is consider selling the Machine-Tech division in order to focus more on core operations – engine manufacturing. This will affect potential buyers rely heavily on the Pinnacle’s financial statement and according to textbook “the larger a client’s operations, the more widely the statements are used and it is will have an effect on acceptable audit risk”.

The practice of reporting the net realizable value of receivables in the financial statements is commonly called:

agreement with holders of 100 percent of the company’s 14% Senior Secured Notes due 2013 and more than 80 percent of the company’s 10% Senior Notes due 2013 pursuant to which the company has agreed to implement a financial and operational restructuring that will rationalize the company’s

Analytical analysis along with the experience from previous audits have helped us in identifying the risks at the financial statement level and identifying the six specific account balances that need to be focused while auditing the financial statements ending October

Peregrine sold the receivables, transferred title to the factor, who assumed all the risks of ownership. In this factoring agreement the accounts receivable were removed from the balance sheet, and the receivables were sold without recourse. This meant that if the receivables were not collected, the factor cannot demand payment.

The date is November 12, 2013. You are the owner-manager of AZTEC Software- a single proprietorship owned company that is currently in financial difficulty. AZTEC needs a new large bank loans if it is to survive. You have been negotiating with several banks, but each has asked to see your 2013 financial statements which will be dated December 31, 2013. These statements will, of course, be audited. You are contemplating on what to do and now you intend to do the following to solve the situation.