Why is the president is so concerned with amount of assets

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Reference no: EM132523137

Point 1: An accountant for a small land development company desperately needs additional financing to continue in business. The president of the company is meeting with the manager of a local bank at the end of the month to try to obtain this financing.

Point 2: The president has with two ideas to improve the company's reported financial position. First, he claims that because a big part of the company's value comes from its knowledgeable and dedicated employees, he should report their Intellectual Abilities as an asset on the balance sheet.

Point 3: Second, he claims that although the local economy is doing poorly and almost no one is buying land or new houses, he is optimistic that eventually things will turn around.For this reason, he wants to continue reporting the company's land on the balance sheet at its cost, rather than the much lower amount that real estate appraisers say its really worth.

Question 1: Why Is the president is so concerned with the amount of assets reported on the balance sheet? What accounting concept relates to the presidents first suggestion to report Intellectual Abilities as an asset? What accounting concept relates to the presidents second suggestion to continue reporting land at its cost? Who might be hurt by the presidents suggestions, if he does these ideas?

Reference no: EM132523137

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