Corporate attributes, applying the entity concept, and preparing financial statements [20-...

Corporate attributes, applying the entity concept, and preparing financial statements [20-25 min]

Andrea Scarlett is a realtor. She organized her business as a corporation, Andrea Scarlett, Realtor, P.C. (Professional Corporation), by investing $19,000 cash. The busi­ness issued common stock to her. Consider the following facts at September 30, 2012.

a. The business owes $61,000 on a note payable for land that the business acquired for a total price of $83,000.

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b. The business spent $23,000 for a Zinka Banker real estate franchise, which entitles the business to represent itself as a Zinka Banker office. This franchise is a business asset.

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c. Scarlett owes $80,000 on a personal mortgage for her personal residence, which she acquired in 2012 for a total price of $160,000.

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d. Scarlett has $5,000 in her personal bank account, and the business has $9,000 in its bank account.

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e. Scarlett owes $4,000 on a personal charge account with Chico’s.

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f. The office acquired business furniture for $15,000 on September 25. Of this amount, the business owes $2,000 on account at September 30.

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g. Office supplies on hand at the real estate office total $1,300.

Requirements

1. Scarlett was concerned about liability exposure. Which corporate feature limits Scarlett’s personal liability?

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2. Prepare the balance sheet of the real estate business of Andrea Scarlett, Realtor, P.C., at September 30, 2012.

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3. Identify the personal items that would not be reported on the business records.