Valuation of Balance Sheet Elements Bland Corporation has applied to your bank for a large long-term loan.

In carefully reviewing the balance sheet and other information, you note the following:

1. The unadjusted historical cost of equipment is $600,000 and accumulated depreciation is $380,000. The estimated cost of replacing the assets with new pieces of equipment is $850,000. The cost of buying comparable used equipment is $180,000.

. The carrying value of inventory is $210,000. The cost of producing the entire amount currently would be $230,000, and the estimated sales price under normal conditions would be approximately $350,000, but only $250,000 if liquidated quickly.

. Ten-year bonds payable were issued at par value of

$500,000 two years ago. Interest rates have risen since then, and the bonds are now trading at $450,000.

What values should be used for financial reporting purposes? Indicate what values are the most useful for your loan decision under each of the following situations, and explain why:

a. The company is profitable and plans to operate in a manner similar to its current mission into the foreseeable future.

b. The company has been experiencing losses recently, and its future is uncertain without some major changes.

c. The company is very profitable, and it is planning to replace some of its production equipment at the end of the year with new units.