Detecting Accounting Fraud 1st Edition by Cecil Jackson

Exercise 31

On January 1, Khaan Company obtained a $30,000 loan from Raptorex Company. The loan terms specify that the loan amount must be repaid on three specific repayment dates by the issue of shares in Khaan. The number of the shares to be issued depends on the market value of the Khaan shares on each repayment date.

Required
a. Calculate the number of Khaan shares that must be issued on each repayment date.
b. Comment on the risk inherent in this form of financing.