P1-30A Corporate attributes, applying the entity concept, and preparing
financial statements [20–25 min]
Andrea Scarlett is a realtor. She organized her business as a corporation, Andrea
Scarlett, Realtor, P.C. (Professional Corporation), by investing $19,000 cash. The business
issued common stock to her. Consider the following facts at September 30, 2012.
a. The business owes $61,000 on a note payable for land that the business acquired
for a total price of $83,000.
b. The business spent $23,000 for a Zinka Banker real estate franchise, which
entitles the business to represent itself as a Zinka Banker office. This franchise is a
business asset.
c. Scarlett owes $80,000 on a personal mortgage for her personal residence, which
she acquired in 2012 for a total price of $160,000.
d. Scarlett has $5,000 in her personal bank account, and the business has $9,000
in its bank account.
e. Scarlett owes $4,000 on a personal charge account with Chico’s.
f. The office acquired business furniture for $15,000 on September 25. Of this amount,
the business owes $2,000 on account at September 30.
g. Office supplies on hand at the real estate office total $1,300.
Requirements
1. Scarlett was concerned about liability exposure. Which corporate feature limits
Scarlett’s personal liability?
2. Prepare the balance sheet of the real estate business of Andrea Scarlett, Realtor,
P.C., at September 30, 2012.
3. Identify the personal items that would not be reported on the business records.
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