Assume that you recently accepted a position with Frontier National Bank as an assistant loan officer. As one of your first duties, you been assigned the responsibility of evaluating a loan request for $150,000 from Icancreateart.com, a small corporation. In support of the loan application, Tees Ramey, owner and sole stockholder, submitted a “Statement of Accounts” (trial balance) for the first year of operations ended July 31, 2012.

1. Explain to Tess Ramey why set of financial statements (income statement, retained earnings statement, and balance sheet) would be useful to you in evaluating the loan request.

2. In discussing the “Statement of Accounts” with Tess Ramey, you discovered that the accounts had not been adjusted at July 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.

3. Assuming that an accurate set of financial statements will be submitted by Tess Ramey in a few days, what other considerations or information would you required before making a decision on the load request?

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Icancreateart.com Statement of Accounts July 31, 2012 Cash Billings Due fram Others.. Supplies (chemicals, etc.). Buikling.. 5,000 *****. 40,000 7,500 ........ ...... 122,300 Equipment.. 25,000 Amounts Owed to Others.. 1,000 Investment in Business. 74,000 Service Revenue 215,000 Wages Expense .. Utilities Expense 75,000 .. **.......................... .... 10,000 ..................................... .......................... 8,000 Rent Expense. . . Insurance Expense. ..** Other Expenses......... ...................... 6,000 .............. 1,200 300.000 ............. 300,000