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For the following case, provide a brief analysis including:
1. A paragraph identifying the problem.
2. A list of 2-3 keywords for the major concepts.
3. A brief solution to the case that relies on explicitly cited section(s) of the Financial Accounting Standards Board Accounting Codification (I expect you to say, Topic ASC XXX-XX-…).
You will also need to prepare a brief presentation summarizing your findings. Be prepared to be called upon to present your work in class.
Mead Motors purchases an automobile for its new car inventory from Generous Motors, which finances this transaction through its financial subsidiary, Generous Motors Credit Company (GMCC). Mead pays no funds to Generous Motors or GMCC until it sells the automobile. Mead must then repay the balance of the loan plus interest to GMCC. How should Mead report the acquisition and repayment transactions in its Statement of Cash Flows?
As of January 1, the Lohse Company owes the First Arbor Bank $350,000 which is due on December 31. Since Lohse seems unable to repay the note, the bank agreed that Lohse can “settle” this balance by agreeing to make four, annual installments on each of the next four years, provided that it adds a “due on demand” clause to the note. Specifically, the lender will “do its best” not to call the note “provided that no adverse significant shift in operations occurs.” However, First Arbor Bank has the sole discretion to ascertain if these adverse conditions arose, and then to call the note due immediately. How should Lohse account for this above situation?
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