Salmon Arm Savings Credit Union (SASCU) has operated in the Shuswap region of BC for last 25 years. In the summer of 20x3, after decades of operation as a prosperous paper mill, the Genelle sawmill was abruptly shut down. Genelle had been a major employer of many clients of SASCU. In fact, of the 1,000 residents of the town in which SASCU operates, over 320 were employed by Genelle.

The following information relates to loans receivable of SASCU as of 30 June 20x4:

	30 June 20x4	30 June 20x3
Loans receivable	$4,306,190	$3,164,000
Less: allowance for doubtful accounts	427,312	412,375
	$3,878,878	$2,751,625

Aging:

As of 30 June 20x3:

	Current	Over 30 Days	Over 60 Days	Over 120 Days	Total
Loans receivable	$1,020,000	$872,000	$$762,000	$510,000	$3,164,000

As of 30 June 20x4:

	Current	Over 30 Days	Over 60 Days	Over 120 Days	Total
Loans receivable	$1,105,612	$632,000	$1,432,578	$1,136,000	$4,306,190

You are in charge of the field work for the SASCU audit. SASCU has been a client of your firm for many years and has always received an unmodified audit report. Your audit senior Lalini reported the following discussion that took place between her and Neil Mort, the chief accountant at SASCU:

Lalini: Neil, I noticed a lot of “for sale” signs on the houses as I drove here on my way to the Credit Union.

Neil: Yes, sadly, that is true. Now that the mill has shut down many of our residents have decided to move. Well, many have lost their jobs and pretty much have to move.

Lalini: How have houses sale been going?

Neil: Not really well, and the situation is getting worse by the day. We are now stuck with a number of homes ourselves, because we’ve had to foreclose on a number of mortgages that are not collectible. This is the first time this has happened in my many years. I’m not sure how to account for these homes that we now own.

Lalini: You would think that low interest rates and low property values would entice more sales.

Neil: We hope that will help! Oh right, I’m also not sure what to do about the interest on these loans. Our system has been accruing interest on all the loans receivable.

REQUIRED:

You are now working to identify the accounting issues that flow from the above information. You have scheduled a meeting with the audit partner tomorrow and decide, in advance of the meeting, to document the issues/areas of concerns in a memo. The memo will include the quantitative impact of issues, to the extent possible.

Answer rating: 100% (QA)

The given question relates to recievables of SASCU While accounting for interest income on loans and ... View the full answer