=+On December 31, 2010, $300,000 of the $1,200,000 loan had been disbursed in modernization of the retail stores and in expansion of the product line. Rainbow Designs Inc.’s balance sheet as of December 31, 2010, is shown below.

Rainbow Designs Inc.

Balance Sheet December 31, 2010 Assets Current assets:

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,000 Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . 900,000 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 219,600 Less allowance for doubtful accounts . . . . . . . . . . . 15,600 204,000 __________ Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . 300,000 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,800 _________ Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . $1,510,800 Property, plant, and equipment:

Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 360,000 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,280,000 Less accumulated depreciation . . . . . . . . . . . . . . . . 516,000 1,764,000 __________ Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,104,000 Less accumulated depreciation . . . . . . . . . . . . . . . . 264,000 840,000 __________ _________ Total property, plant, and equipment. . . . . . . . . . . . 2,964,000 __________ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,474,800 __________ __________ Liabilities Current liabilities:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,320 Notes payable (Washington National Bank) . . . . . . . . 120,000 Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,680 __________ Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . $ 300,000 Long-term liabilities:

Notes payable (Washington National Bank) . . . . . . . . 1,080,000 _________ Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,380,000 Stockholders’ Equity Paid-in capital:

Common stock, $20 par (100,000 shares authorized, 60,000 shares issued) . . . . . . . . . . . . . . $1,200,000 Excess of issue price over par . . . . . . . . . . . . . . . . . . 96,000 __________ Total paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . $1,296,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,798,800 __________ Total stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . 3,094,800 __________ Total liabilities and stockholders’ equity . . . . . . . . . . . . . $4,474,800 __________ __________