Large Bank Performance Bond Investment Case Study - Accounting Assignment Help

Assignment Task

QUESTION 
LARGE BANK [“LB”] a well-known bank whose headquarters are in Central. It has expanded beyond  Hong Kong and now has branches in 30 countries. 
LB makes large profits each year in assisting merchants to purchase goods from overseas. It does this  through the issuance of Letters of Credit, Performance Bonds, and other documentary credits. 
LB also lends to local companies and individuals. 
LB has decided that it will expand its business into several new product areas. 
LB publicizes the new products in local newspapers, by sending letters to customers, and also sending letters  to a list of people it has “bought” from a credit card agency. 
In LB’s official publicity, the following statements are made: 
“Our new ventures. Come along for advice and investment with us. Ask to see Bill or Charles, our  investment advisers. 
Our offices are ready to help you with generous loans, easy repayment terms, the lowest interest in  Hong Kong – in fact so low you will not realise you are paying interest. 
Your security for a loan? Ask your friends to back you. You can charge worthwhile assets to us.  Send your wife along to sign up with us.” 
The publicity had several more statements of this type. 
The following events occurred: 
1. Able was not a customer at LB but had a small account at Small Bank [“SB”]. He had won $1million in the casino in Macau, and thought it would be a good idea to invest it. He went along to LB and asked to see Bill.
Bill thought Able was a customer of LB and advised him to invest in Lowman Mini bonds. Able gave Bill the million dollars. Bill invested in the bonds, and the bonds were worthless. Able decides to sue LB. The year is 2013. Able did not become a customer of LB.

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