The CFO of your audit client Bravo Corporation (the Company) has drafted the following related party note for the Company’s 2022 financial statements, which are presented, for comparative purposes, with the Company’s 2021 financial statements. The CFO has asked you to review the note and offer him any comments that you might have.
The Company rents certain equipment storage facilities from a limited liability company (the LLC) controlled by the Company’s CEO and his immediate family. During the year ended December 31, 2022, the Company paid the LLC $60,000 in rent. As of December 31, 2022, the Company owed the LLC $15,000 in rents for the months of October, November, and December.
These unpaid rents are included in the Company’s accounts payable balance on December 31, 2022. In the opinion of the management of the Company, $5,000 per month in rent is fair market rental for the property. In addition, during 2022 the Company paid the CEO’s wife a salary of $125,000 for her services as the Company’s in-house legal counsel.
Required:
Describe comments on disclosure requirements of the GAAP standard on related parties, if any, that you may have for the Company’s CFO regarding this note.