Barley Company is a medium-sized industrial firm that has been audited by your firm for several years. The only interest-bearing debt owed by Barley is long-term notes payable of $300,000 held by First National Bank. The notes were issued 4 years earlier and will mature in 8 more years. Barley is highly profitable, has no pressing needs for additional financing, and has excellent internal controls of the recording of loans and related interest cost transactions. REQUIRED: 1. Based on this scenario, describe the auditing procedures that you think will be necessary for notes payable and related interest accounts. 2. How will your answer differ if instead Barley Company was unprofitable, needed additional financing, and had ineffective internal controls?
Barley Company is a medium-sized industrial firm that has been audited by your firm for several years. The only interest-bearing debt owed by Barley is long-term notes payable of $300,000 held by First National Bank. The notes were issued 4 years earlier and will mature in 8 more years. Barley is highly profitable, has no pressing needs for additional financing, and has excellent internal controls of the recording of loans and related interest cost transactions. REQUIRED: 1. Based on this scenario, describe the auditing procedures that you think will be necessary for notes payable and related interest accounts. 2. How will your answer differ if instead Barley Company was unprofitable, needed additional financing, and had ineffective internal controls?
Chapter6: Business Expenses
Section: Chapter Questions
Problem 43P
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Question
Barley Company is a medium-sized industrial firm that has been audited by your firm for several years. The only interest-bearing debt owed by Barley is long-term notes payable of $300,000 held by First National Bank. The notes were issued 4 years earlier and will mature in 8 more years. Barley is highly profitable, has no pressing needs for additional financing, and has excellent internal controls of the recording of loans and related interest cost transactions.
REQUIRED:
1. Based on this scenario, describe the auditing procedures that you think will be necessary for notes payable and related interest accounts.
2. How will your answer differ if instead Barley Company was unprofitable, needed additional financing, and had ineffective internal controls?
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