Problem: Majorie Caballero is a Realtor. She buys and sells properties on her own, and she also earns commission as an agent for buyers and sellers. Caballero organized her business as a corporation on November 24, 2005. The business received $50,000 from Caballero and issued common stock. Consider these facts as of November 30, 2004.
1. Caballero has $10,000 in her personal bank account and $6,000 in the business bank account.
2. Caballero owes $1,800 on a personal charge account with Nordstrom department store.
3. Caballero acquired business furniture for $17,000 on November 25. Of this amount, her business owes $6,000 on open account at November 30.
4. Office supplies on hand at the real estate office total $1,000.
5. Caballero business owes $40,000 on a note payable for some undeveloped land acquired for a total price of $120,000.
6. Caballero's business spent $20,000 for a Century 21 real estate franchise, which entitle her to represent herself as a Century 21 agent. Century 21 is a national affiliation of independent real estate agents. This franchise is a business asset.
7. Caballero owes $100,000 in a personal mortgage on her personal residence, which she acquired in 2001 for a total price of $160,000.
Question 1. Prepare the balance sheet of this real estate business of Majorie Caballero, Realtor, INC., at November 30, 2004
Question 2. Does it appear that Caballero's reality business can pay its debts? How can you tell?
Question 3. Identify the personal items in the preceding facts that would not be reported on the balance sheet of the business.