For each of these situations, indicate the amount to be placed on a statement of financial condition at December 31, 2012.
a. Bill and Pat Konner purchased their home at 2829 Willow Road in Stow, Ohio, in August 1994 for $80,000. The unpaid mortgage is $20,000. Immediately after purchasing the home, Bill and Pat added several improvements totaling $10,000. Real estate prices in Stow have increased 40% since the time of purchase.
From the facts given, determine the estimated current value of the home.
b. Joe Best drives a Toyota, for which he paid $20,000 when it was new. Joe believes that since he maintains the car in good condition, he could sell it for $12,000. The average selling price for this model of Toyota is $9,000.
From the facts given, determine the estimated current value of Joe's car.
c. Sue Bell is 40 years old and has an IRA with a balance of $20,000. The IRS penalty for early withdrawal is 10%. The marginal tax rate for Sue Bell is 30% (tax on gross amount). What is the estimated current value of the IRA and the estimated income taxes on the difference between the estimated current values of assets and the estimated current amounts of liabilities and their tax bases?
d. Bill Kell guaranteed a loan of $8,000 for his girlfriend to buy a car. She is behind in payments on the car.
What liability should be shown on Bill Kell's statement of financial condition?
e. Dick Better bought a home in 1996 for $70,000. Currently, the mortgage on the home is $45,000. Because of the current high interest rates, the bank has offered to retire the mortgage for $40,000.
What is the estimated current value of this liability?