You are the loan officer of a multinational bank. A small company, Samson Company, would like to apply for a loan. In support of the loan application, Samson Chan, owner, submitted a Trial Balance for the first year of operations ended on December 31, 2019. You have asked the company to submit other financial statements that include Income Statement, Statement of Financial Position and Cash Flow Statement for evaluating the performance of the company. Samson Company Trial Balance December 31, 2019 2$ Supplies Machinery Equipment 6,400 187,300 68,000 20,500 Cash Share capital Service revenue received 160,000 391,120 Salaries paid Utilities paid Rent paid Insurance paid 121,000 8,000 130,000 9,920 551,120 551,120 In discussing the Trial Balance with Samson Chan, you asked whether adjusting entries have been prepared to get the accounts up to date for the Trial Balance. Samson Chan answered that they have not been adjusted. Required: a. Explain why the bank would need to read other financial statements such as Income Statement, Statement of Financial Position and Cash Flow Statement. b. Explain why the loan officer suspected that the accounts had not been adjusted prior to the preparation of the Trial Balance. c. Indicate FOUR possible adjusting entries that might be necessary before an accurate set of financial statements could be prepared.
You are the loan officer of a multinational bank. A small company, Samson Company, would like to apply for a loan. In support of the loan application, Samson Chan, owner, submitted a Trial Balance for the first year of operations ended on December 31, 2019. You have asked the company to submit other financial statements that include Income Statement, Statement of Financial Position and Cash Flow Statement for evaluating the performance of the company. Samson Company Trial Balance December 31, 2019 2$ Supplies Machinery Equipment 6,400 187,300 68,000 20,500 Cash Share capital Service revenue received 160,000 391,120 Salaries paid Utilities paid Rent paid Insurance paid 121,000 8,000 130,000 9,920 551,120 551,120 In discussing the Trial Balance with Samson Chan, you asked whether adjusting entries have been prepared to get the accounts up to date for the Trial Balance. Samson Chan answered that they have not been adjusted. Required: a. Explain why the bank would need to read other financial statements such as Income Statement, Statement of Financial Position and Cash Flow Statement. b. Explain why the loan officer suspected that the accounts had not been adjusted prior to the preparation of the Trial Balance. c. Indicate FOUR possible adjusting entries that might be necessary before an accurate set of financial statements could be prepared.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter4: Completing The Accounting Cycle
Section: Chapter Questions
Problem 3CP
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Transcribed Image Text:You are the loan officer of a multinational bank. A small company, Samson Company, would
like to apply for a loan. In support of the loan application, Samson Chan, owner, submitted a
Trial Balance for the first year of operations ended on December 31, 2019.
You have asked the company to submit other financial statements that include Income
Statement, Statement of Financial Position and Cash Flow Statement for evaluating the
performance of the company.
Samson Company
Trial Balance
December 31, 2019
2$
Supplies
Machinery
Equipment
6,400
187,300
68,000
20,500
Cash
Share capital
Service revenue received
160,000
391,120
Salaries paid
Utilities paid
Rent paid
Insurance paid
121,000
8,000
130,000
9,920
551,120
551,120
In discussing the Trial Balance with Samson Chan, you asked whether adjusting entries have
been prepared to get the accounts up to date for the Trial Balance. Samson Chan answered that
they have not been adjusted.
Required:
a. Explain why the bank would need to read other financial statements such as Income
Statement, Statement of Financial Position and Cash Flow Statement.
b. Explain why the loan officer suspected that the accounts had not been adjusted prior to the
preparation of the Trial Balance.
c. Indicate FOUR possible adjusting entries that might be necessary before an accurate set of
financial statements could be prepared.
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