Question

Farmers State Bank is considering a $500,000 loan to Willard Manufacturing. Three items appearing on Willard's balance sheet are:
a. Cash on hand and in the bank, $20,000.
b. Accounts receivable of $60,000, less an allowance for uncollectibles of $15,000.
c. Accumulated depreciation of $36,000.

Required:
1. Which of the balance sheet items-cash, net accounts receivable, or accumulated depreciation-is the most relevant for the bank's loan decision? Why?
2. Which of the balance sheet items is the most representationally faithful? Why?



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  • CreatedSeptember 10, 2014
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