ACC309 - Intermediate Accounting III

INSTRUCTIONS FOR MILESTONE 1 (Due Week 3)

IMPORTANT NOTE:

Make sure to completely review the Rubric for Milestone 1

Use the data from this Milestone and begin working on your final presentation due in Week 7

ITEMS TO COMPLETE FOR THIS MILESTONE:

GENERAL

In preparation of the annual audit, prepare appropriate adjusting entries and post to the trial balance workbook (red tab)

ADJUSTING ENTRIES

Prepare adjusting entries for unrealized loss

Prepare adjusting entries for tax issues

MANAGEMENT BRIEF - Prepare in a Word document - see the rubric for milestone 1

A. Identify sources of other comprehensive income not included in net income.

B. Explain rationale for the inclusion as comprehensive income (as opposed to net income) of nondisclosure within notes.

C. Evaluate impacts of company goals and finances for their implications on stockholder equity, using financial information to support claims.

D. Evaluate impacts of company goals and finances for their implications on retained earnings per share, using financial information to support claims.

E. Explain the impact of issuing preferred stock or debt for determining changes to equity structures.

F. Assess the impact of changes to current tax structure for articulating changes relevant to the company.

FINANCIAL INFORMATION FOR THIS MILESTONE

Comprehensive income items

Marketable securities on the balance sheet at a cost of $5,500,000 are available-for-sale

Market value at the balance sheet date is $5,235,00

Prepare the adjusting entry to record the unrealized loss and include in comprehensive income

Tax information and implications

$1,500 in meal and entertainment expenses show as a permanent difference for tax. Prepare the necessary adjusting entry.

The company uses straight line depreciation for book and MACRS depreciation for the tax return

MACRS depreciation was $209,301 higher than book. Prepare the adjusting entry for the deferred tax.

There have been recent tax structure changes the could impact the company. Peyton Approved has been a C Corp since the beginning of these changes. Peyton provides for taxes at 25% of pretax income (20% Federal, 5% state).

Stockholder Equity

Peyton Approved prides itself on transparency with shareholders and investors. The company has added two storefront locations and launched a new marketing campaign, which is estimated to bring in 20,000 new customers over the next 6 months.

The company expects this expansion will require an additional $1,000,000 of capital and generate an additional $600,000 of after-tax profit. The options are:

1) Issuing an additional $1,000,000 of 10%, 100-par convertible preferred stock (same class as is currently outstanding)

2) Issue an additional $1,000,000 of 8% convertible bonds (same terms as the existing issue)

3) $500,000 each of preferred stock and bonds

			PEYTON APPROVED
			TRIAL BALANCE
			As of December 31, 2017			Adjusting entries
		Dr		Cr		Dr		Cr		Dr		Cr
Cash		1,488,999.34								1,488,999.34
Marketable Securities		5,500,000.00								5,500,000.00
Accounts Receivable		7,092,495.88								7,092,495.88
Baking Supplies		1,605,098.52								1,605,098.52
Merchandise Inventory		128,152.63								128,152.63
Prepaid Rent		71,877.07								71,877.07
Prepaid Insurance		207,834.14								207,834.14
Misc. Supplies		17,647.42								17,647.42
Land		250,000.00								250,000.00
Building		1,250,000.00								1,250,000.00
Baking Equipment		2,254,140.00								2,254,140.00
Accumulated Depreciation				328,282.00								328,282.00
Patent										-
Accounts Payable				1,555,212.85								1,555,212.85
Wages Payable				250,203.31								250,203.31
Interest Payable				21,888.22								21,888.22
Current Portion of Bonds Payable				1,000,000.00								1,000,000.00
Income Taxes Currently Payable				1,042,118.16								1,042,118.16
Accrued Pension Liability												-
Accrued Employees Health Insurance												-
Lease Liability												-
												-
Deferred Tax Liability												-
Bonds Payable				4,000,000.00								4,000,000.00
Preferred Stock				500,000.00								500,000.00
Common Stock				1,750,000.00								1,750,000.00
Beginning Retained earnings				2,213,122.59								2,213,122.59
Dividends - Preferred		50,000.00								50,000.00
Dividends - Common		5,250,000.00								5,250,000.00
Bakery Sales				33,881,157.15								33,881,157.15
Merchandise Sales				124,795.80								124,795.80
Cost of Goods Sold - Baked		10,954,907.36								10,954,907.36
Cost of Goods Sold - Merchandise		88,994.79								88,994.79
Rent Expense		1,576,731.95								1,576,731.95
Wages Expense		2,604,526.23								2,604,526.23
Misc. Supplies Expense		263,224.56								263,224.56
Repairs and Maintenance		47,353.05								47,353.05
Business License Expense		211,757.65								211,757.65
Misc. Expense		141,171.08								141,171.08
Depreciation Expense		634,520.00								634,520.00
Insurance Expense		112,937.69								112,937.69
Advertising Expense		160,413.49								160,413.49
Interest Expense		484,703.27								484,703.27
Telephone Expense		50,821.34								50,821.34
Pension Expense										-
Retired Employees Health Ins.										-
Patent Amortization										-
										-
Unrealized Gain/(Loss) on Marketable Securities Held for Sale										-
										-
Income Taxes		4,168,472.62								4,168,472.62
Deferred tax Expense										-
		46,666,780.08		46,666,780.08		-		-		46,666,780.08		46,666,780.08
					(1)							milestone 1
					(2)							milestone 1
					(3)							milestone 1
					(4)							milestone 2
					(5)							milestone 2
					(6)
												milestone 2
					(7)							final
					(8)							final