As part of his audit of the financial statements of MarlboroughCorporation for t

As part of his audit of the financial statements of MarlboroughCorporation for the year ended March 31 200X Mark Wayne CPA isreviewing the balance sheet presentation of a $1200000 advance toFranklin Olds Marlboroughs president The advance whichrepresents 50 percent of current assets and 10 percent of totalassets was made during the year ended March 31 200X It has beendescribed in the balance sheet as miscellaneous accountsreceivable and classified as a current asset Olds informs the CPAthat he has used the proceeds of the advance to purchase 35000shares of Marlboroughs common stock in order to forestall atakeover raid on the company He is reluctant to have hisassociation with the advance described in the financial statementsbecause he does not have voting control and fears that this willjust give the raiders ammunition Olds offers the following fourpoint program as an alternative to further disclosure (1) Have theadvance approved by the board of directors (This can be doneexpeditiously because a majority of the board members are officersof the company (2) Prepare a demand note payable to the companywith interest of 12 percent (the average bank rate paid by thecompany). (3) Furnish an endorsement of the stock to the company ascollateral for the loan. During the year under audit despite thefact that earnings did not increase the market price ofMarlborough common rose from $20 to $40 per share. The stock hasmaintained its $40 per share market price subsequent to year-end.(4) Obtain a written opinion from the company attorney supportingthe legality of the companys advance and the use of the proceeds.Required: A. Discuss the proper balance sheet classification of theadvance to Olds and other appropriate disclosures in the financialstatements and notes. (Ignore SEC regulations and requirements taxeffects creditors restrictions on stock repurchase and thepresentation of common stock dividends and interest revenue.) B.Discuss each point of Oldss four-point program as to whether it isdesirable and as to whether it is an alternative to furtherdisclosure. C. If Olds refuses to permit further disclosure whataction should the CPA take? Discuss. D. In his discussion with theCPA Olds warns that the raiders if successful probably willappoint new auditors. What consideration should the CPA give tothis factor? Explain.