Reference no: EM133376550

Case Study: TFD, Inc. recently applied for a loan from BNB Credit Union . The large loan received considerable scrutiny, but based on the recommendation of the loan officer and the bank manager it looked like BNB was going to approve the loan. Unfortunately, the day before the loan was to be approved, TFD's owner discovered some mistakes in the financial records. She has asked you to help her find and correct any mistakes as quickly as possible so that they can send the updated financial statements to the credit union before a final decision is made

Questions: After careful review, you have determined the following issues need to be corrected:

1. lease on a new set of equipment was inappropriately recorded as a debit to rent expense and credit to cash. The lease was signed at the beginning of 2022 and requires annual payments made at the beginning of each period

The market value of the leased asset was $1,336,000 and it had an estimated useful life of 5years with no salvage value. The lease is for 3 years with annual payments of $183,456. TFD's marginal borrowing rate is 5.

2. customer paid $180,000 for a special order on 9/22/2022. The cash receipt was appropriately recorded (debit to cash and credit to unearned revenue), but no entry was made on 12/31/2022 when the order was shipped. The inventory cost $140,400 to produce

3. Members of the sales force are paid commissions twice a year. Commissions on sales fromJanuary - June are paid on July 10th and commissions from July - December are paid onJanuary 10th. No entry has been made for the commissions earned during the last half of2022. Total sales from July to December were $3,439,800, but only 25.% of those sales were subject to the 7.5% commission. Commissions are reported with Sales Force Salaries

4. Make the appropriate journal entries, if any, to correct the mistakes listed above. Please ignore the effects of income taxes for this assignment

5. if you were the loan officer at BNB Credit Union, would you approve the loan? Defend your answer

6. TFD's owner had to make a difficult decision: to report the mistakes to the bank or not. Thedecision might have negative results for her company if BNB's underwriting team decides notto approve the loan. Why do you think TFD's owner decided to be honest in this situation?Provide at least THREE (3) factors that would motivate someone to make the right choice inthis difficult situation