A General Principle of Disclosure Is That Material Related-Party Transactions

question 63

Multiple Choice

A general principle of disclosure is that material related-party transactions should be disclosed.As the auditor of the Clarence Company,you have noted the following transactions entered into by Clarence during the past fiscal year:
I.Clarence borrowed $1,000,000 from the Southwest Bank issuing a noninterest-bearing note.
II.Clarence borrowed $2,000,000 from BH Savings at a rate significantly above the market rate prevailing at that time for such a borrowing.
III.Clarence borrowed $500,000 from First Bank with no scheduled terms for how or when funds will be repaid.
Assuming all of the above transactions are material,which transaction or transactions above most likely would be a related party transaction requiring disclosure in Clarence's financial statements?

• A)Only I above.
• B)Both II and III above.
• C)Both I and III above.
• D)Only III above.

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Definitions:

Earliest Due Date

A scheduling method that prioritizes tasks or orders based on the earliest due date.

Shop Floor Dispatching

The process of scheduling and controlling work and workloads on the manufacturing or production floor in real-time.

Time Available

The total amount of time that can be utilized for a specific purpose or task, often factoring in operational hours and capacity constraints.

Minimizing Completion Time

A scheduling objective aimed at reducing the total time taken to complete a set of tasks or projects.