Critical Thinking 4-05 a-b Sandhill Janitorial Service was started 2 years ago by Jenna Olson. Because business has been exceptionally good, Denna decided on July 1, 2020, to expand operations by acquiring an additional truck and hiring two more assistants. To finance the expansion, Jenna obtained on July 1, 2020, a $26,900,10% bank loan, payable $10,700 on July 1, 2021, and the balance on July 1, 2022. The terms of the loan require the borrower to have $10,000 more current assets than current liabilities at December 31, 2020. If these terms are not met, the bank loan will be refinanced at 15% Interest. At December 31, 2020, the accountant for Sandhill Janitorial Service Inc. prepared the balance sheet shown below. Sandhill Janitorial Service Balance Sheet December 31, 2020 Assets Liabilities and owner's Equity Current assets Current Wabilities Cash $6,000 Notes payable $10,700 Accounts receivable 8,400 Accounts payable 2,270 Supplies Total current liabilities 12,970 Prepaid Insurance 4,800 Long-term liability Total current assets 25,400 Notes payable 16,200 Property, plant, and equipment Total liabilities 29,170 Equipment (net) 21,400 Owner's equity Delivery trucks (net) 32,000 Owner's capital 49,630 Total property, plant, and equipment 53,400 Total assets $78,800 Total liabilities and owner's equity $78,800 6.200 Jenna presented the balance sheet to the bank's loan officer on January 2, 2021, confident that the company had met the terms of the loan. The loan officer was not impressed. She said, "We need financial statements audited by a CPA." A CPA was hired and immediately realized that the balance sheet had been prepared from a trial is Weygandt, Accounting Principles, 13e WilayPLUS: My WPLUS I Hele 1 Contact Us Les Principles of Accounting 13e (ACC 171-185-2 actice Assignment Gradebook ORION Downloadable eTextbook nment CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Jenna presented the balance sheet to the bank's loan officer on January 2, 2021, confident that the company had met the terms of the loan. The loan officer was not impressed. She said, "We need financial statements audited by a CPA. A CPA was hired and immediately realized that the balance sheet had been prepared from a trial balance and not from an adjusted trial balance. The adjustment data at the balance sheet date consisted of the following. 1. Unbilled janitorial services performed were $3,630. 2. Janitorial supplies on hand were $2,290. 3. Prepaid insurance was a 3-year policy dated January 1, 2020. 4. December expenses incurred but unpaid at December 31, $490. 5. Interest on the bank loan was not recorded. 6. The amounts for property, plant, and equipment presented in the balance sheet were reported net of accumulated depreciation (cost less accumulated depreciation). These amounts were $3,200 for cleaning equipment and $6,100 for delivery trucks as of January 1, 2020. Depreciation for 2020 was $1,870 for cleaning equipment and $4,400 for delivery trucks. CALCULATOR FULL SCREEN PR SANDHILL JANITORIAL SERVICE Balance Sheet For the Month Ended December 31, 2020 Assets Current Assets Cash 6000 Accounts Receivable 8,400 Supplies 6,200 Prepaid Insurance 4,800 Total Current Assets 25,400 Property, Plant and Equipment Equipment 21,400 Less Accumulated Depreciation Equipment 1870 19530 CALCULATOR www FULL SCREEN PRINTER VE JU Delivery Trucks 6,100 Less Accumulated Depreciation-Delivery Trucks 4,400 10,500 30,030 Total Assets 55,430 Liabilities and Owner's Equity Current Liabilities Notes Payable 10,700 Accounts Payable 2,270 Interest Payable 0 Total Current Liabilities 12,970 Long-term Liabilities Notes Payable 10,700 Long-term Liabilities CALCULATOR FULL SCREEN Notes Payable 10,700 Total Liabilities 23,670 Owner's Equity Owner's Capital 36,640 Total Liabilities and Owner's Equity 49610 x Your answer is incorrect. Try again. Were the terms of the bank loan met? No