Twenty years ago Sigurdsen Corp. purchased an office building in Oslo for 12 million Norwegian kroner (Kr),

Question:

Twenty years ago Sigurdsen Corp. purchased an office building in Oslo for 12 million Norwegian kroner (Kr), 4 million of which was attributable to land. Sigurdsen has fully paid off the mortgage. The current balance sheet follows (in millions):

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 30 million appraised value of the combined land and building before the modernization and expansion. Prepare a balance sheet after Sigurdsen Corp. obtains the loan and expands and modernizes the building, but before it charges any further depreciation. Comment on the usefulness of the balance sheet.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...