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question 2 george costanza an old friend of yours from...

Question: question 2 george costanza an old friend of yours from...

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Question #2 George Costanza, an old friend of yours from high school, started a small business about a year ago, which is organized as a private corporation. George is currently in the process of applying for a bank loan to expand his business. He shows you the most recent statement of financial position that he has prepared for the bank, which is as follows: COSTANZA CORPORATION Statement of Financial Position September 30, 2018 Assets Cash Accounts receivable Equipment $80,000 22,000 160,000 $262,000 Total assets Accounts payable Shareholders equity $27,000 235000 $262,000 Total liabilities and shareholders equity Since George knows that you are studying accounting at the U of R, he asks your opinion. What do you think? he says. Do you think the bank will be impressed and lend me the 100,000 Im asking for? You study the statement for a few minutes. You are pretty sure George doesnt have anywhere near $160,000 worth of equipment belonging to the business, so you ask where all this equipment is. Well, explains George, in order to increase my assets, I included my personal vehicle, computer and camera equipment, and some of my furniture. Theyre worth about $90,000. That should be OK, since these assets belong to me even though they dont belong to the company. On further questioning, George admits that he added his personal savings account of $45,000 in with the company cash to make it look better. Instructions (a) Who are the stakeholders (users) here? Name two. (b) Is Georges creative accounting ethical? Why or why not? (c) What would you recommend be done here? (Note: Bonus marks can be earned here)

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