Reference no: EM132674763

Usage of Financial Statements in Business Decisions

Assume that you recently accepted a position with Stockman National Bank as an assistant loan officer. As one of your first duties, you have the responsibility of evaluating a loan request for $90,000 from Goldworks.com, a small proprietorship. In support of the loan application, Yolanda Tovar, owner, submitted a trial balance for the first year of operations ended March 31, 2010.

GOLDWORKS.COM

Trial Balance

March 31, 2010

Cash 4,100 /

Billing Due from Others 30,140 /

Supplies 14,940 /

Trucks 52,740/

Equipment 16,180/

Amount Owed to Others / 5,700

Investment in Business / 47,000

Service Revenue / 147,300

Wages Expense 60,100/

Utilities Expense 14,660/

Rent Expense 4,800 /

Insurance Expense 1,400/

Other Expense 940 /

200,000 / 200,000

Use the trial balance to answer the questions.

Question 1: Explain to Yolanda Tovar 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.

Question 2: In discussing the Trial Balance with Yolanda Tovar, you discovered that the accounts had not been adjusted at March 31. Analyze the Trial Balance and indicate possible adjusting entries that might be necessary before an accurate set of financial statements could be prepared.

Question 3: Assuming that an accurate set of financial statements will be submitted by Yolanda Tovar in a few days, what other considerations or information would be required before making a decision on a loan request?

Question 4: You noted that Goldworks.com's trial balance is prepared through March 31, 2010. Why would the business close out its year on this date? What factors could influence this selection?