After six months of operations, Mrs. She estimated that the center would pay $13,120 for salaries; $1,280 cash for utilities (which was higher than the first six months because of expected colder weather) $5,600 for additional food and supplies (higher because of higher enrollment); and $2,720 for interest and miscellaneous (lower than the first six months because certain start-up costs were paid for during the first six months). She also expected to pay back the government loan Frances Nissen wanted to analyze the performance of Early Years Day Care Center. She wanted to know where the company stood as of December 31, 1982, and what its future prospects were Early Years Day Care Center was a company organized by Mrs. Nissen early in 1982 to provide supervised care, preschool education, a snack, and a noonday meal primarily for children of working mothers For its initial capital, Mrs Nissen took out a $24,000 mortgage on her own house. She invested $21,000 of this in common stock of the center. Friends of hers invested $11,000 in cash, receiving stock in return A government agency made a one-year loan of $6,500 to the center She estimated that supplies on hand as of June 30 would be $320 and that nothing would be owed suppliers. She did not include any additional amounts for insurance or taxes because the amounts paid in the first six months covered these costs for the whole year With these funds, the center purchased property for $40,000, of which $8,000 was for land and $32,000 was for a building on the land. The purchase was financed in part with a $27,000 mortgage, the remainder being paid in cash. Interest on the mortgage was to be paid quarterly, but no principal repayment was required until the company had become established The center also purchased $13,200 of furniture and equipment for cash She knew that many companies recorded depreciation on buildings, furniture, and equipment; however, she had a firm offer of $56,000 cash for these assets from someone who wanted to buy the center, so she thought that under these circumstances inappropriate depreciation was Questions 1. Prepare the balance sheet for Early During the first six months of operations, which ended December 31, 1982, the center paid out the following additional amounts in cash Salary* to Mrs Nissen Salaries* of part-time employees Insurance (one-year policy) Years Day Care Center as of December 31 8,000 5,120 2 Should the noncurrent assets be reported on the December 31, 1982 balance sheet at their cost, at $56,000, or at some other amount? (The amount need not be calculated.) If at some amount other than cost, how would the balance sheet prepared in Question 1 be changed? 4.370 Total paid out includes payroll taxes The center received $16,880 student 4. Does it appear likely that Early Years fees in cash. In addition, parents owed the center $600 for student fees. As of December 31, 1982, Mrs. Nissen estimated that $320 of supplies were still on hand The center owed food suppliers $520 Day Care Center will become a viable company; that is, is it likely to be profitable if Mrs Nissen's estimates are correct? In thinking about the future, Mrs. Nissen, estimated that for the next six months, ending June 30, student fees received (in addition to the $600 student fees that applied to the first six months) would be $25,600. This was higher than the amount forthe first six months because enrollments were higher Taken from Acsountioa Text and Cases (7h edition) by RN Anthony, JS Reece, JH Herteostein