Assume that you recently accepted a position with the Bozeman National Bank as an assistant loan officer. As one of your first duties, you have been assigned the responsibility of evaluating a loan request for $150,000 from Sasquatch.com, a small corporation. In support of the loan application, Samantha Joyner, owner, submitted a “statement of accounts” (trial balance) for the first year of operations ended December 31, 2006.
1. Explain to Samantha Joyner why a set of financial statements (income statement, statement of retained earnings, balance sheet, and statement of cash flows) would be useful to you in evaluating the loan request.
2. In discussing the statement of accounts with Samantha Joyner, you discovered that the accounts had not been adjusted at December 31. Analyze the statement of accounts (shown at the top of the following page) 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 Samantha Joyner in a few days, what other considerations or information would you require before making a decision on the loan request?