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Pursuant to Mr. Yates’ direction, Mr. Adams transferred funds
from Adena to Fox Trot and recorded the transactions as follows1:
Date Amount Adena’s Books Fox Trot’s Books
1993 $1,920,112 Distribution to Mr.Contribution to capital
Yates
1993 1,037 Accumulated Contribution to capital
Adjustments Account
Jan. 1 through 853,557 Loans to Mr. Yates Accounts Payable – Mr.
Sept. 1, 1994 Yates
Sept. 1 through 415,279 Loans to Mr. Yates Accounts Payable – Mr.
Dec. 31, 1994 Yates
Jan. 1 through Oct.293,360 Accounts Receivable –Accounts Payable - Yates
15, 1995 Yates
Jan. 1 through Oct.543,447 Accumulated Accounts Payable - Yates
15, 1995 Adjustments Account
A loan agreement entered in 1994 relating to the mining debt
limited Mr. Yates’ dividends from Adena to 90 percent of Adena’s
earnings, but did not restrict his ability to borrow from Adena.
In response, Mr. Yates directed Mr. Adams to change the posting
procedure, beginning on October 1, 1994, so that subsequent
transfers of funds from Adena to Fox Trot were posted as either
distributions or loans from Adena to Mr. Yates and as either
capital contributions or loans from Mr. Yates to Fox Trot. Mr.
Adams recorded, in Adena’s books, the 1995 transfers of funds
1From 1993 through Sept. 30, 1994, Mr. Adams initially
recorded transfers in the “Due to/from Fox Trot” account of
Adena’s books, and the “Due to/from Adena” account in Fox Trot’s
books. Mr. Adams, at the end of 1993, reposted the 1993
transfers in Adena’s books as distributions or loans from Adena
to Mr. Yates and in Fox Trot’s books as contributions to capital.
Similarly, prior to the end of 1994, Mr. Adams posted the 1994
transfers in Adena’s books as loans to Mr. Yates and in Fox
Trot’s books as accounts payable to (i.e., loans from) Mr. Yates.
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Last modified: May 25, 2011