The financial position of St. Charles Ranch is summarized in the following letter to the corporation's accountant.
Dear Dallas:
The following information should be of value to you in preparing the balance sheet for St. Charles Ranch as of December 31, 2013. The balance of cash as of December 31 as reported on the bank statement was $43,825. There were still outstanding checks of $9,320 that had not cleared the bank, and cash on hand of $10,640 was not deposited until January 4, 2014.
Customers owed the company $40,500 at December 31. We estimated 6% of this amount will never be collected. We owe suppliers $37,000 for poultry feed purchased in November and December. About 75% of this feed was used before December 31.
Because we think the price of grain will rise in 2014, we are holding 10,000 bushels of wheat and 5,000 bushels of oats until spring. The market value at December 31 was $3.50 per bushel of wheat and $1.50 per bushel of oats. We estimate that both prices will increase 15% by selling time. We are not able to estimate the cost of raising this product.
St. Charles Ranch owns 1,850 acres of land. Two separate purchases of land were made as follows: 1,250 acres at $200 per acre in 1991 and 600 acres at $400 per acre in 1996. Similar land is currently selling for $800 per acre. The balance of the mortgage on the two parcels of land is $250,000 at December 31; 10% of this mortgage must be paid in 2014.
Our farm buildings and equipment cost us $176,400 and on the average are 40% depreciated. If we were to replace these buildings and equipment at today's prices, we believe we would be conservative in estimating a cost of $300,000.
We have not paid property taxes of $5,500 for 2014 billed to us in late November. Our estimated income tax for 2013 is $18,500. A refund claim for $2,800 has been filed relative to the 2011 income tax return. The claim arose because of an error made on the 2011 return.
The operator of the ranch will receive a bonus of $9,000 for 2013 operations. It will be paid when the entire grain crop has been sold.
As you may recall, we issued 14,000 shares of $1 par stock upon incorporation. The ranch received $290,000 as net proceeds from the stock issue. Dividends of $30,000 were declared last month and will be paid on February 1, 2014.
The new year appears to hold great promise. Thanks for your help in preparing this statement.
Sincerely,
Frank K. Santiago
President, St. Charles Ranch
Instructions:
Based on this information, prepare a properly classified balance sheet as of December 31, 2013.