Accounting, Analysis, and Principles

Early in January $2016,$ Hopkins Company is preparing for a meeting with its bankers to discuss a loan request. Its bookkeeper provided the following accounts and balances at December $31,2015.$

Debit Account:

Inventory :$65,300$

Accounts Receivable $($net$)$ : $38,500$

Cash : $75,000$

Equipment $($net$)$ : $84,000$

Patents : $15,000$

Credit Account:

Notes and Accounts Payable: $52,000$

Notes Payable $($due $2017)$: $75,000$

Share Capital$$Ordinary: $100,000$

Retained Earnings: $50,800$

Except for the following items, Hopkins has recorded all adjustments in its accounts.

$1.$ Net accounts receivable is comprised of $52,000$ in accounts receivable and $13,500$ in allowance for doubtful accounts.

$2.$ Cash includes $500$ petty cash and $15,000$ in a bond sinking fund.

$3.$ Equipment had a cost of $112,000$ and accumulated depreciation of $28,000.$

$4.$ On January $8,2016,$ one of Hopkins$$ customers declared bankruptcy. At December $31,$

$2015,$ this customer owed Hopkins $9,000.$

Accounting

Prepare a corrected December $31,2015,$ statement of financial position for Hopkins

Company.

Analysis

Hopkins$$ bank is considering granting an additional loan in the amount of $45,000,$ which will be due December $31,2016.$ How can the information in the statement of financial position provide useful information to the bank about Hopkins$$ ability to repay the loan $?$

Principles

In the upcoming meeting with the bank, Hopkins plans to provide additional information about the fair value of its equipment and some internally generated intangible assets related to its customer lists. This information indicates that Hopkins has significant unrealized gains on these assets, which are not reflected on the statement of financial position. What objections are the bank likely to raise about the usefulness of this information in evaluating Hopkins for the loan renewal $?$