Tom Baxter, owner and general manager, must compile financial statements from a year-end listing of adjusted accounts because he is meeting with the bank’s loans manager tomorrow to review Lamrock’s financial statements. This review was one of the conditions in place to maintain Lamrock’s loan agreement with the bank
This case is designed to test students on their ability to sort through a listing of accounts and discern where they belong on the company’s financial statements. Beyond the mechanics , the teacher is provided with leading questions to encourage student to analyze and interpret these statements, resulting in students understanding why and how readers (bank managers, company managers, owners, or stockholders) use these statements to glean useful information about a firm’s financial performance before making business decisions.
Identification of accounts as either belonging to the income statement, statement of retained earnings, or balance sheet; compilation of the aforementioned financial statements; rudimentary interpretation and analysis of these statements for decision-making purposes.