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Several years ago, your brother opened Magna Appliance Repairs He made a small initial investment and added money from his personal bank account as needed He withdrew money for living expenses at

Several years ago, your brother opened Magna Appliance Repairs. He made a small initial investment and added money from his personal bank account as needed. He withdrew money for living expenses at irregular intervals. As the business grew, he hired an assistant. He is now considering adding more employees, purchasing additional service trucks, and purchasing the building he now rents. To secure funds for the expansion, your brother submitted a loan application to the bank and included the most recent financial statements (which follow) prepared from accounts maintained by a part-time bookkeeper. Magna Appliance Repairs Balance Sheet October 31, 2016 Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . ...............$ 95,400 Amounts due from customers . . .....................112,500 Truck . . . . . . . . . . . . . . . . . . . . . . . . . . ..............332,100 Total assets . . . . . . . . . . . . . . . . . . . . ............. $540,000 Equities Owner s capital . . . . . . . . . . . . . . . . . .............$540,000 After reviewing the financial statements, the loan officer at the bank asked your brother if he used the accrual basis of accounting for revenues and expenses. Your brother responded that he did and that is why he included an account for "Amounts Due from Customers." The loan officer then asked whether or not the accounts were adjusted prior to the preparation of the statements. Your brother answered that they had not

May 14 2020 View more View Less

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