You were engaged to examine the financial statements of Ronlyn Corporation for the year ended June 30 On May 1 the corporation borrowed $500,000 from the Second National Bank to finance plant expansion The long term note agreement provided for the annual payment of principal and interest over five ...

a The audit objectives in the examination of longterm debt are to determine that 1 All liabilities w ...

You were engaged to examine the financial statements of Ronlyn Corporation for the year ended June 30.

Question:

You were engaged to examine the of Ronlyn for the year ended June 30. On May 1 the borrowed $500,000 from the Second National Bank to finance plant expansion. The long-term note agreement provided for the annual payment of principal and interest over five years. The existing plant was pledged as security for the loan.
Due to unexpected difficulties in acquiring the building site, the plant expansion had not begun as planned. To make use of the borrowed funds, on May 16, management invested the $500,000 in securities.

Required:
a. What are the audit objectives in the examining of long-term debt?
b. Prepare an audit program for the examination of the long-term note agreement between Ronlyn and Second National Bank.

Financial Statements
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