Product Number TCG047

THE CRIMSON PRESS CURRICULUM CENTER

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THE CRIMSON GROUP, INC.

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Carson Realty Company (B)
The Carson Realty Company (CRC) owned several apartment buildings in Greater Carson, a
small Midwestern community. It rented studio apartments, as well as one- and two-bedroom

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apartment units to individuals—mainly university students—in the town.
CRC began operations in July 2012. During the month of July, the following events occurred
(differences from the Carson Realty Company (A) case are shown in bold faced type):
July 1 The company borrowed $24,000,000 on a 20 year note to finance its activities.
The interest rate was 12 percent. Interest and principal payments were due and
payable on the first day of each month, beginning on August 1.
July 5 The company purchased an apartment building that was 90% occupied. After all

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closing costs, legal fees, and other purchase-related transactions had been com-
pleted, the building cost $15,000,000. The building’s economic life was 10 years
and a salvage value was $3,000,000.
July 11 $500,000 in materials for renovations and repairs were purchased on credit. Pay-
ment was due August 11.
July 14 Tenants in 90 rental units paid their rent, which averaged $600 per unit. Ten ten-
op
ants promised to pay their $600 July rent on August 1.
July 15 Building staff was paid for the first half of July. Total payroll was $4,000.
July 28 Tenants in 200 rental units paid their rent, which averaged $500 per unit.
July 30 Utilities for the month were paid, totaling $15,000.
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July 31 Building staff was owed for the last two weeks of July. Total payroll was
$5,000. Payment would be made on August 1
July 31 $20,000 of the supply inventory had been used for minor repairs and mainte-
nance.
Assignment
1. Prepare a balance sheet for CRC as of July 31, 2012. Try to do so by setting up T accounts and posting entries
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to them. Then calculate ending balances for all the T accounts. Then set the balance sheet up in its proper
format.
2. Prepare an income statement for July 2012, again in proper format.
3. Prepare a statement of cash flows for July 2012, using either the direct or indirect method.
4. What is your assessment of the financial condition of CRC? In answering this question, you should speculate
on what the August financial statements will look like?
Do

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This case was prepared by Professor David W. Young. It is intended as a basis for class discussion and not to illus-
trate either effective or ineffective handling of an administrative situation.
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