Assume that you recently accepted a position with Five Star National Bank & Trust as an assistant loan officer. As one of your first duties, you have been assigned the responsibility of evaluating a loan request for $300,000 from West Gate Auto Co., a small proprietor- ship. In support of the loan application, Joan Whalen, owner, submitted a "Statement of Accounts" (trial balance) for the first year of operations ended October 31, 2019. West Gate Auto Co. Statement of Accounts October 31, 2019 Cash 5,000 Billings Due from Others. Supplies (chemicals, etc.) Building... 40,000 7,500 222,300 Equipment.. 50,000 Amounts Owed to Others.. 31,000 Investment in Business 179,000 Service Revenue 215,000 Wages Expense 75,000 Utilities Expense 10,000 8,000 Rent Expense . Insurance Expense Other Expenses 6,000 1,200 425,000 425,000 Explain to Joan Whalen why a set of financial statements (income statement, 1. 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 Joan Whalen, you discovered that the accounts had not been adjusted at October 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. Assuming that an accurate set of financial statements will be submitted by 3. Joan Whalen in a few days, what other considerations or information would you require before making a decision on the loan request?
Assume that you recently accepted a position with Five Star National Bank & Trust as an assistant loan officer. As one of your first duties, you have been assigned the responsibility of evaluating a loan request for $300,000 from West Gate Auto Co., a small proprietor- ship. In support of the loan application, Joan Whalen, owner, submitted a "Statement of Accounts" (trial balance) for the first year of operations ended October 31, 2019. West Gate Auto Co. Statement of Accounts October 31, 2019 Cash 5,000 Billings Due from Others. Supplies (chemicals, etc.) Building... 40,000 7,500 222,300 Equipment.. 50,000 Amounts Owed to Others.. 31,000 Investment in Business 179,000 Service Revenue 215,000 Wages Expense 75,000 Utilities Expense 10,000 8,000 Rent Expense . Insurance Expense Other Expenses 6,000 1,200 425,000 425,000 Explain to Joan Whalen why a set of financial statements (income statement, 1. 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 Joan Whalen, you discovered that the accounts had not been adjusted at October 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. Assuming that an accurate set of financial statements will be submitted by 3. Joan Whalen in a few days, what other considerations or information would you require before making a decision on the loan request?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume that you recently accepted a position with Five Star National Bank & Trust as an
assistant loan officer. As one of your first duties, you have been assigned the responsibility
of evaluating a loan request for $300,000 from West Gate Auto Co., a small proprietor-
ship. In support of the loan application, Joan Whalen, owner, submitted a "Statement of
Accounts" (trial balance) for the first year of operations ended October 31, 2019.
West Gate Auto Co.
Statement of Accounts
October 31, 2019
Cash
5,000
Billings Due from Others.
Supplies (chemicals, etc.)
Building...
40,000
7,500
222,300
Equipment..
50,000
Amounts Owed to Others..
31,000
Investment in Business
179,000
Service Revenue
215,000
Wages Expense
75,000
Utilities Expense
10,000
8,000
Rent Expense .
Insurance Expense
Other Expenses
6,000
1,200
425,000
425,000
Explain to Joan Whalen why a set of financial statements (income statement,
1.
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 Joan Whalen, you discovered that the
accounts had not been adjusted at October 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.
Assuming that an accurate set of financial statements will be submitted by
3.
Joan Whalen in a few days, what other considerations or information would you require
before making a decision on the loan request?
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