Jim Sandrolini is an accountant for a local manufacturing company. Jim’s good friend, Dan Carruthers, has been operating a retail sporting goods store for about a year. The store has been moderately successful, and Dan needs a bank loan to help finance the next stage of his store’s growth. He has asked Jim to prepare financial statements that the banker will use to help decide whether to grant the loan. Dan has proposed that the fee he will pay for Jim’s accounting work should be contingent upon his receiving the loan.

Required:

What factors should Jim consider when making his decision about whether to prepare the financial statements for Dan’s store?