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 $31,2023.$

Data Table $(3$ columns$)$

$1$st column is item description

$2$nd column is an amount

$3$rd column is an amount

Header

GoldWorks.com

Trail Balance

Friday, March $31,2023$

Data Table items

Cash $($Left Column$)4,100$

Accounts Receivable $($Left Column$)30,140$

Supplies $($Left Column$)14,940$

Trucks $($Left Column$)52,740$

Equipment $($Left Column$)16,180$

Accounts Payable $($Right Column$)5,700$

Investment in Business $($Right Column$)47,000$

Service Revenue $($Right Column$)147,300$

Wages Expense $($Left Column$)60,100$

Utilities Expense $($Left Column$)14,660$

Rent Expense $($Left Column$)4,800$

Insurance Expense $($Left Column$)1,400$

Other Expenses $($Left Column$)940$

Last Row $200,000($Left Column$)200,000($Right Column$)$

Use the trial balance to answer the questions.

Explain to Yolanda Tovar how important the income statement, the statement of owner's equity, and the balance sheet are in evaluating the loan request.

In discussing the trial balance with Yolanda Tovar, you discovered that the accounts had not been adjusted on 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, how do you think the assistant loan officer would evaluate accounts receivable and net income in deciding on the loan request?

You noted that Goldworks.com's trial balance is prepared through March $31,2023.$ Why would the business close out its year on this date? What factors could influence this selection?