BUSI 2130 Case Assignment #2 Alpamayo-Fall 2021.docx - BUSI...

BUSI 2130
Fall 2021
Case Assignment # 2
Due Friday, October 29 @ 10AM
Alpamayo Ltd. is a Canadian manufacturer of outdoor furniture. It manufactures a wide range of high-
quality, durable, and attractive furniture and other outdoor seating, outdoor dining tables, gazebos etc.,
designed for summer use at cottages and on patios. Alpamayo is owned by a small group of individual
investors who take pride in selling “Canadian made” products.
It’s late October 2021. You are a CPA who was recently hired as Alpamayo accountant. You reporting to
Alpamayo’s CFO. Alpamayo has a bank loan, and as part of the ongoing reporting, Alpamayo is required
to provide financial statements. The loan agreement requires that Alpamayo maintain a current ratio
greater than 1.25 and a debt-to-equity ratio below 1.6 at the end of each quarter. If Alpamayo violates
either of the covenants, the terms of the loan will be subject to renegotiation and perhaps repayment.
Violating the covenants would also make it significantly less likely that the bank would provide Alpamayo
with the additional financing, which it would need if it were able to secure some of the larger contracts
that it has been working on this year.
The loan officer has approached Alpamayo regarding some of the transactions that took place during the
third quarter and the CFO has asked you to prepare a response. The accounting for the events described
below were made by the previous bookkeeper, who is not a CPA and who no longer works for Alpamayo.