Financial statements
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 proprietorship. In support of the loan application, Joan Whalen, owner, submitted a “Statement of Accounts” (
West Gate Auto Co. Statement of Accounts October 31,2019 | ||
Cash | 5,000 | |
Billings Due from Others | 40,000 | |
Supplies (chemicals, etc.) | 7,500 | |
Building | 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 | |
Rent Expense | 8,000 | |
Insurance Expense | 6,000 | |
Other Expenses | 1,200 | |
425,000 | 425,000 |
1. Explain to Joan Whalen why a set of financial statements (income statement, statement of owner’s equity, and
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
3. Assuming that an accurate set of financial statements will be submitted by 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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Chapter 4 Solutions
Accounting
- On November 1, 2021, Aviation Training Corp. borrows $44,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) Record the repayment of the note at maturity. Note: Enter debits before credits. Date General Journal Debit Credit February 01, 2022arrow_forwardOn November 1, 2021, Aviation Training Corp. borrows $44,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) Record the adjusting entry for interest. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021arrow_forwardBlue Company, an architectural firm, has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2019), the company hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. The total cash receipts are summarized as follows. The accounts receivable from customers at the end of the year are 120,000. You note that the accounts receivable at the beginning of the year were 190,000. The cash sales included 30,000 of prepayments for services to be provided over the period January 1, 2019, through December 31, 2021. a. Compute the companys accrual basis gross income for 2019. b. Would you recommend that Blue use the cash method or the accrual method? Why? c. The company does not maintain an allowance for uncollectible accounts. Would you recommend that such an allowance be established for tax purposes? Explain.arrow_forward
- Kelly Jones and Tami Crawford borrowed $12,000 on a 7-month, 6% note from Gem State Bank to open their business, Cullumber's Coffee House. The money was borrowed on June 1, 2022, and the note matures January 1, 2023. (a) Prepare the entry to record the receipt of the funds from the loan. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation June 11 Debit Creditarrow_forwardOn November 1, 2024, Survival Training Corporation borrows $49,000 cash from Community Savings and Loan. Survival Training signs a three-month, 6% note payable. Interest is payable at maturity. Survival's year-end is December 31. Required: 1. to 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)arrow_forwardOn November 1, 2024, Survival Training Corporation borrows $51,000 cash from Community Savings and Loan. Survival Training signs a three-month, 6% note payable. Interest is payable at maturity. Survival's year-end is December 31. Required: 1. to 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet < 1 2 Record the issuance of note. Date 3 Note: Enter debits before credits. November 01, 2024 General Journal Debit Creditarrow_forward
- On November 1, 2021, Aviation Training Corp. borrows $41,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) 1. Record the issuance of note. 2. Record the adjusting entry for interest. 3. Record the repayment of the note at maturity.arrow_forwardOn December 31, 2019, the Notes Payable account at Vanessa’s Boutique Shop had a balance of $62,800. This amount represented funds borrowed on a six-month, 9 percent note from the firm’s bank on December 1.Record the journal entry for interest expense on this note that should be recorded on the firm’s worksheet for the year ended December 31, 2019. Journal entry worksheet Record the adjustment for interest. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31, 2019arrow_forwardUse the following information for the next 4 items: You were assigned to audit the borrowings of your client, Benedict Company, as of and for the year ended December 31, 2022. Upon examining their records, and inquiry with management, you have found out that the company has the following notes outstanding as of December 31, 2022: A 10%-note issued to Supreme Inc. in exchange for a second-hand delivery vehicle on June 30, 2022. The face amount of the note is P800,000 and is due on June 30, 2027. Interest is payable semi-annually every June 30 and December 31. On the date of issuance, the delivery vehicle does not have a reliable fair market value, and the annual prevailing market rate of interest at that time for notes with similar characteristics is 12%. A three-year 12% note issued to Ace Company with principal amount of P1,500,000 dated November 30, 2021. The principal is payable in three installments of P500,000 plus interest on outstanding balance every November 30, beginning on…arrow_forward
- Kelly Jones and Tami Crawford borrowed $30,000 on a 7-month, 9% note from Gem State Bank to open their business, Crane’s Coffee House. The money was borrowed on June 1, 2022, and the note matures January 1, 2023. Correct answer iconYour answer is correct. Prepare the entry to record the receipt of the funds from the loan. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit June 1 enter an account title to record the receipt of the funds from the loan on June 1 enter a debit amount enter a credit amount enter an account title to record the receipt of the funds from the loan on June 1 enter a debit amount enter a credit amount eTextbook and Media List of Accounts Partially correct answer iconYour answer is partially correct. Prepare the entry to accrue the interest on June 30. (Credit account titles…arrow_forwardPrepare the necessary journal entries (include journal entry descriptions) for the selected transactions of Nester Company whose fiscal year end is December 31, You MUST show the details of any calculations either in parenthesis or as a footnote. Date Transaction Description 7/1/20Y5 Accepted a 5-month, 6% note in settlement of a past due customer account, Barns Company, with a $9,000 balance. 11/1/20Y5 Accepted a promissory note from a Nester Company executive in exchange for providing the executive with S20,000 to be used for relocation costs. The note carries interest of 9% and is due in 8 months. 12/1/20Y5 Received the amount due on the note from Barns Company. 12/31/20Y5 Accrued interest on the 8-month note received from the Nester Company executive. 7/1/20Y6 Received full payment from the Nester Company executive.arrow_forwardOn September 1, 2021, Allied Moving Corp. borrows $110,000 cash from First National Bank. Allied signs a six-month, 5% note payable. Interest is payable at maturity. Allied's year-end is December 31. 1., 2. & 3. Record the following transactions for the note payable by Allied Moving Corp. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your answers to nearest dollar amount.) View transaction list Journal entry worksheet < 1. 2 Record the issuance of notes payable. Date Sep 01, 2021 3 Note: Enter debits before credits. Record entry General Journal Clear entry Debit Credit View general jourarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningIndividual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT