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

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    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.

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    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.

    $2.19

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