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L. L. Sams & Melinda Garcia Career: Make loan decisions based on balance sheet only

The proprietors of two businesses, L.L. Sams Company and Melinda Garcia Career Services, have sought business loans from you. To decide whether to make the loans you have requested their balance sheets.

L.L. Sams Company
Balance Sheet
August 31, 20X4
Assets Liabilities
Cash
$9,000 Accounts Payable $12,000
Accounts Receivable 14,000 Note Payable 18,000
Merchandise Inventory 85,000 Total Liabilities 30,000
Store supplies 500
Building 80,000 Owner's Equity
Furniture and fixtures 9,000 L.L. Sams, capital 181,500
Land 14,000 Total liabilities
Total assets $211,500 And owner's equity $211,500

Melinda Garcia Career Services
Balance Sheet
August 31, 20X4
Assets Liabilities
Cash $11,000 Accounts Payable $6000
Accounts Receivable 7,000 Note Payable 168,000
Office supplies 1,000 Total Liabilities 174,000
Office furniture 56,000
Land 169,000 Owner's Equity
Melilnda Garcia, capital 70,000
Total liabilities
Total assets $244,000 And owner's equity $244,000

Solely on the basis of these balance sheets, to which entity would you be more comfortable lending money? Explain fully, citing specific items and amounts from the balance sheets. In addition to balance sheet data, what other information would you require? Be specific.

Solution Summary

The solution carefully analyzes the two balance sheets to decide whether a business loan should be given to one or both. There are excellent narrative statements to support the calculations.

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