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Han’s Hiking Corporation is planning to expand its current plant facilities and is in the process of 1 answer below » Han’s Hiking Corporation is planning to expand its current plant facilities and is in the process of obtaining a loan at City Bank. The bank has requested audited financial statements. Han’s financial statements have never been audited before. It has prepared the following comparative financial statements for the years ended December 31, 2008 and 2007. Han’s Hiking Corporation Comparative Balance Sheets December 31, 2008 and 2007 Document Preview: Han’s Hiking Corporation is View complete question » Han’s Hiking Corporation is planning to expand its current plant facilities and is in the process of obtaining a loan at City Bank. The bank has requested audited financial statements. Han’s financial statements have never been audited before. It has prepared the following comparative financial statements for the years ended December 31, 2008 and 2007. Han’s Hiking Corporation Comparative Balance Sheets December 31, 2008 and 2007 Document Preview: Han’s Hiking Corporation is planning to expand its current plant facilities and is in the process of obtaining a loan at City Bank. The bank has requested audited financial statements. Han’s financial statements have never been audited before. It has prepared the following comparative financial statements for the years ended December 31, 2008 and 2007. Han’s Hiking Corporation Comparative Balance Sheets December 31, 2008 and 2007 2008 2007 Assets Current Assets: Cash $602,500 $400,000 Accounts receivable 980,000 740,000 Allowance for bad debts (92,500) (45,000) Inventory 517,500 505,000 Total current assets $2,007,500 $1,600,000 Plant assets: Property, plant, & equipment $417,500 $423,750 Accumulated depreciation (304,000) (266,000) Total plant assets $113,500 $157,750 Total assets $2,121,000 $1,757,750 Liabilities and Stockholders’ Equity Liabilities: Accounts payable $303,500 $490,250 Stockholders’ Equity: Common stock, par value $25: authorized, 30,000 shares; issued and outstanding 26,000 shares $650,000 $650,000 Retained earnings 1,167,500 617,500 Total stockholders’ equity $1,817,500 $1,267,500 Total liabilities and stockholders’ equity $2,121,000 $1,757,750 Han’s Hiking Corporation Comparative Income Statements For the Years Ended December 31, 2008 and 2007 2008 2007 Sales $2,500,000 $2,250,000 Cost of goods sold 1,075,000 987,500 $1,425,000 $1,262,500 Operating expenses 575,000 512,500 General and administrative expenses 300,000 262,500 $875,000 $775,000 Net income $550,000 $487,500 The following facts were uncovered during the audit. a) On January 20, 2007, Han’s had charged a 5-year fire insurance premium to expense. The total premium amounted to $15,500. b) Over the last two years, the amount of loss due to bad debts has steadily decreased. Han’s has decided to reduce the amount of bad debt expense from 2% to 1.5% of sales, beginning with 2008. (A charge of 2% has already been made for 2008.) c) The inventory account (maintained on a per
