?Complete the Waddicor Real Estate, Inc. Download Waddicor Real Estate, Inc. assignment Fair Value Accounting

You are an accounting analyst with McGilvray CPAs. In $2020,$ ?Joseph Waddicor opened a new

real estate investment firm. Mr $.$ ?Waddicor acquired a small office building and leased it to a local

law office. He was surprised when he reviewed the financial statements you prepared at the end

of the first year. He believed that he got an excellent deal on the building and that his new company

was worth a lot more than the financial statements reflected. Your boss asked you to prepare a

balance sheet and an income statement using both the historical and fair value approaches. She

wants you to show the statements side by side and then to prepare a short memo explaining the

differences.

Background: On January $1,2020,$ ?Waddicor Real Estate, Inc. $($ Waddicor $)$ ?started its business by

raising $ $110,000$ ?in cash; $ $60,000$ ?from issuing equity and $ $50,000$ ?from issuing $6\%$ ?bonds at par.

Waddicor used the whole amount of cash to buy a building, also on January $1,2020.$ ?Waddicor

leases the building for $ $10,000$ ?per year. Given below is the opening balance sheet from January

$1,2020,$ ?for Waddicor, its first year of operations.

At the end of $2020,$ ?the building is worth $ $150,000.$ ?Also, the market value of the bonds has fallen

to $ $49,000.$ ?Assume the useful life of the building is $30$ ?years, and its salvage value is $ $50,000$ ?at

the end of that period. The building is depreciated using straight line depreciation. The rental

income of $ $10,000$ ?is received on the December $31,2020,$ ?the last day of the year. The interest on

the bonds is also paid on December $31,2020.$

Prepare the year $-$ end balance sheet and income statement for Waddicor Real Estate, Inc. based on

Fair Value accounting. Compare the historical and fair values at year end. $($ Use the form on the

next page. $)$ ?Also, prepare a $1-1\mathrm{.}5$ ?page professional memorandum to Mr $.$ ?Waddicor explaining the

differences between the two sets of statements. Also give your opinion as to which set of financial

statements more accurately reflects the value of the company and explain why. Calculations

Cash Balance ${?}^{**}$

Depreciation Expense ${?}^{******}$