Topic 1: Usage of Financial Statements in Business Decisions

Assume that you recently accepted a position with Stockman National Bank as an assistant loan officer. As one of your first duties, you have the responsibility of evaluating a loan request for $90,000 from Goldworks.com, a small proprietorship. In support of the loan application, Yolanda Tovar, owner, submitted a trial balance for the first year of operations ended March 31, 2010.

Use the trial balance to answer the questions.

• Explain to Yolanda Tovar why a set of financial statements (income statement, statement of owner's equity, and balance sheet) would be useful to you in evaluating the loan request.
• In discussing the Trial Balance with Yolanda Tovar, you discovered that the accounts had not been adjusted at March 31. Analyze the Trial Balance and indicate possible adjusting entries that might be necessary before an accurate set of financial statements could be prepared.
• Assuming that an accurate set of financial statements will be submitted by Yolanda Tovar in a few days, what other considerations or information would be required before making a decision on a loan request?
• You noted that Goldworks.com's trial balance is prepared through March 31, 2010. Why would the business close out its year on this date? What factors could influence this selection?

CASH

4,100

BILLING DUE from Others

30,140

Supplies

14,940

Trucks

52,740

Equipment

16,180

Amount owed to others

5,700

Investment in Business

47,000

Service Revenue

147,300

Wages Expense

60,100

Utilities Expense

14,660

Rent Expense

4,800

Insurance Expense

1,400

Other Expenses

940

200,000

200,000

GOLDWORKS.COM

TRIAL BALANCE

MARCH 31, 2010