Examlex
The Porsha Bank has provided its auditor with the following selected financial data for 2010:
In reviewing the loans outstanding, the auditors were troubled by the fact that the collectability of some loans to Brazil was questionable. In fact, Porsha Bank has been making new loans to Brazil so that they can pay the interest on the loans already outstanding. The economic situation of Brazil has forced the auditors to insist that Porsha Bank increases its allowance for its current loans to $9,000 and for its non-current loans to $16,000. Porsha Bank decided to adhere to their auditors' suggestions.
Indicate the effects of adopting the auditor's allowance requirements on Porsha Bank's current ratio and 2010 net income.
Replacement Cost
The expense of replacing an asset at its current market price.
Net Realizable Value
The estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Restricted Fund
Funds that are designated for a specific purpose by the donor or governing authority, limiting their use by the recipient organization.
Investment Income
Income received from investments, including dividends, interest, rental income, and capital gains.
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