Reference no: EM13135720
Joshua Thorp opened Laser Co. on January 1, 2011. At the end of the first year, the business needed additional funds. On behalf of Laser, Joshua applied to Vermont National Bank for a loan of $500,000. Based on Laser financial statements, which has been prepared on a cash basis, the Vermont National Bank loan officer rejected the loan as too risky.
After receiving the rejection notice, Joshua instructed his accountant to prepare the financial statements on an accrual basis. These statements included $90,000 in accounts receivable and $35,000 in accounts payable. Joshua then instructed his accountant to record ad additional $25,000 of accounts receivable for commissions on property for which a contract had been signed on December 28th, 2011. The title to the property is to transfer on January 5th, 2012, when an attorney formally records the transfer of the property to the buyer.
Joshua the applied for a $500,000 loan from NYC Bank, using the revised financial statements. On this application, Joshua indicated that he had not previously been rejected for credit.
Discuss the ethical and professional conduct of Joshua Thorp in applying for the loan from NYC Bank.
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