Pixel Graphics is a graphics arts design consulting firm. Marcie Biel, its treasurer and vice president of finance, has prepared a classified balance sheet as of August 31, 2010, the end of its fiscal year. This balance sheet will be submitted with Pixel Graphics’ loan application to Planet Trust & Savings Bank.
In the Current Assets section of the balance sheet, Marcie reported a $75,000 receivable from Chas Gaddis, the president of Pixel Graphics, as a trade account receivable. Chas borrowed the money from Pixel Graphics in November 2008 for a down payment on a new home. He has orally assured Marcie that he will pay off the account receivable within the next year. Marcie reported the $75,000 in the same manner on the preceding year’s balance sheet.
Evaluate whether it is acceptable for Marcie Biel to prepare the August 31, 2010, balance sheet in the manner indicated above.
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