Analyze statement of accounts and indicate possible entries

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Reference no: EM131198825

Financial statements

Assume that you recently accepted a position with Frontier National Bank as an assistant loan officer. As one of your first duties, you have been assigned the responsibility of evaluating a loan request for $150,000 a small proprietorship. In support of the loan application, Tess Ramey, owner, submitted a "Statement of Accounts" (trial balance) for the first year of operations ended July 31, 2012.

Cash	5,000
Billings Due from Others	40,000
Supplies (chemicals, etc.)	7,500
Building	122,300
Equipment	25,000
Amounts Owed to Others		11,000
Investment in Business		74,000
Service Revenue		215,000
Wages Expense	75,000
Utilities Expense	10,000
Rent Expense	8,000
Insurance Expense	6,000
Other Expenses	1,200
	300,000	300,000

1. Explain to Tess Ramey why a set of financial statements (income statement, statement of owner's equity, and balance sheet) would be useful to you in evaluating the loan request.

2. In discussing the "Statement of Accounts" with Tess Ramey, you discovered that the accounts had not been adjusted at July 31. Analyze the "Statement of Accounts" and indicate possible adjusting entries that might be necessary before an accurate set of financial statements could be prepared.

3. Assuming that an accurate set of financial statements will be submitted by Tess Ramey in a few days, what other considerations or information would you require before making a decision on the loan request?

Reference no: EM131198825

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