Judge Ltd. (Judge) operates a small chain of auto supply shops. The company has been in business
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If the covenant is violated, all loans become payable in full in 30 days.
Judge owns a piece of land and a building that used to be one of its shops but hasn't been used for four years. The building is in very poor condition and isn't in a very good part of town. Judge hasn't been able to find a tenant or a buyer in over two years. The land and building have a carrying amount of $3,370,000 and Judge has now received an offer of $2,000,000 for them. The offer is attractive, especially because it would provide some urgently needed cash. The offer expires on June 30, 2017, the last day of Judge's fiscal year, and it's not likely to be renewed.
It's now June 27, 2017. Judge's management estimates that net income for the year will be about $450,000. Management also projects that on June 30, 2017 current liabilities will be $1,150,000 and long-term debt will be $3,350,000. Common shares on June 30, 2017 will be $1,600,000 and retained earnings on June 30, 2016 was $1,450,000.
You have been asked by Judge's president to prepare a report discussing all the business and accounting issues relevant to the land and building.
Required:
Prepare the report requested by Judge's president.
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