AUDITING RMU
AUDITING RMU
11th Edition
ISBN: 9781260934830
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 21, Problem 21.18MCQ
To determine

Concept Introduction:

Prospective financial statement means financial statement that is also known as projected financial statement based on some assumptions. Projected financial statement tells us about the future activities of the business. The projected financial statement is made on basis of past records. It is highly subjective in nature and its preparation requires the exercise of considerable judgment.

To choose:Objective of preparing prospective financial statement

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4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…
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