Question
Twenty years ago Sigurdson Corp. purchased an office building in Oslo for 12 million Norwegian kroner (Kr), 4 million of which was attributable to land.
Twenty years ago Sigurdson Corp. purchased an office building in Oslo for 12 million Norwegian kroner (Kr), 4 million of which was attributable to land. Sigurdson has fully paid off the mortgage. The current balance sheet follows (in millions):
Cash | Kr | 3.0 | Stockholders' equity | Kr | 8.3 | |||
Land | 4.0 | |||||||
Building at cost | Kr | 8.0 | ||||||
Accumulated depreciation | 6.7 | |||||||
Book value | 1.3 | |||||||
Total assets | Kr | 8.3 |
The company is about to borrow Kr 18 million on a first mortgage to modernize and expand the building. This amounts to 60% of the Kr 30million appraised value of the combined land and building before the modernization and expansion.
Requirements
1. | Prepare a balance sheet after Sigurdson Corp. obtains the loan and expands and modernizes the building, but before it charges any further depreciation. Requirement 1. Prepare a balance sheet after SigurdsonSigurdson Corp. obtains the loan and expands and modernizes the building, but before it charges any further depreciation.
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