Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufacturessophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which isprivately owned, has approached a bank for a loan to help it finance its growth. The bank requires financialstatements before approving such a loan. You have been asked to help prepare the financial statements andwere given the following list of costs:1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory employees.11. Depreciation on chairs…
You have recently been hired by First National Bank as the assistant loan officer. Part of your work involves assessing which
companies should be allowed to borrow money from the bank. The bank wants to lend money to all companies that will likely have the
resources available at the time the loan obligation becomes due. During the current week, three companies have approached you
about obtaining a two-year loan. For each of these companies, you ask to see their balance sheets over the previous six years. Your
analyses of the companies' assets and liabilities are provided in the graphs below. Examine those graphs and answer the following
questions:
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$0
Year 1
2
Company A
3
4
5
$100,000
$75,000
6
Company B
$75,000
RP
-Liabilities
-Assets
$50,000
Click here to open the graph(s) in a new tab.
Required:
1. The reported amount of assets for Company A over the six-year period is:
2. The reported amount of liabilities for Company B over the…
You work as an accountant for a small land development company that desperately needs additionalfinancing to continue in business. The president of your company is meeting with the manager of alocal bank at the end of the month to try to obtain this financing. The president has approached youwith two ideas to improve the company’s reported financial position. First, he claims that because abig part of the company’s value comes from its knowledgeable and dedicated employees, you shouldreport their “Intellectual Abilities” as an asset on the balance sheet. Second, he claims that by reporting the company’s land on the balance sheet at its cost, rather than the much higher amount that realestate appraisers say it’s really worth, the company is understating the true value of its assets.Required:1. Thinking back to Chapter 1, why do you think the president is so concerned with the amountof assets reported on the balance sheet?2. What accounting concept introduced in Chapter 2 relates to the…
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