AGUAMAINT, INC. AGUAMAINT, INC. STATEMENT OF INCOME BALANCE SHEET FOR THE YEAR ENDING DECEMBER 31, 20X1 DECEMBER 31, 20X1 Service revenue $ 757.800 ASSETS Expenses CURRENT ASSETS Cost of goods sold 476.295 Cash S 2.536 Selling and administrative 248,969 Accounts receivable 69,600 Depreciation and amortization 17,060 Total Current Assets 72,136 Tax expense 3.250 Total expenses 745,574 LONG-TERM ASSET S Equipment 42,700 Net income 12 226 Accumulated depreciation-equipment (6,100) License 44.800 Start-up costs 31,040 Total Long-Term Assets 112,440 TOTAL ASSETS 184,576 LIABILITIES AND STOCKHOLDERS EQUITY LIABILITIES CURRENT LIABILITIES Accounts payable 19,100 Taxes payable 3.250 Total Current Liabilities 22,350 OWNERS EQUITY Common stock 150,000 Retained earnings 12 226 Total Stockholders' Equity 162 226 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 184.576AGUAMAINT, INC. 11 562 SERVICE COSTS-INDIRECT-SHOP UTILITIES 7,250 JOURNAL ENTRIES 601 SELLING & ADMIN-UTILITIES 1,450 DECEMBER 31, 20X1 101 CASH 8,700 To record accrual and payment ofutility expense JIE # DATE ACCT # ACCOUNT NAME DE BIT CREDIT 1/02/X1 101 CASH 30,000 12 553 SERVICE COSTS-DIRE CT-FUEL 31,205 197 LICENSE 40,000 101 CASH 31,205 461 CAPITAL STOCK-COMMON 70,000 To record purchase and payment of truck fuel. To record issuance of common stock for cash and license agreement. 13 564 SERVICE COSTS-INDIRECT-SUPPLIES 14,200 2 1/02/X1 197 LICENSE 8,000 302 ACCTS PAY-SUPPLIERS-OTHER COSTS 14,200 101 CASH 8,000 To record purchase of shop supplies on account. To record cash payment for license agreement 14 552 SERVICE COSTS-DIRECT-LEASE EXPENSE-TRUCKS 71,800 1/02/X1 563 SERVICE COSTS-INDIRECT-LEASE EXPENSE-SHOP BLDG 22,500 101 CASH 71,800 602 SELLING & ADMIN-LEASE EXPENSE-OFFICE BLDG 4,500 To record maintenance trucks rental payment 101 CASH 27,000 To record payment and allocation ofrental expense for the shop and office. 15 217 START-UP COSTS 38,800 101 CASH 38,800 4 1/10/X1 171 EQUIPMENT 42,700 To record payment ofstart-up costs oftraining new employees 303 ACCTS PAY-EQUIPMENT ACQUISITION 42,700 To record purchase of shop equipment. 16 303 ACCTS PAY-EQUIPMENT ACQUISITION 42,700 302 ACCTS PAY-SUPPLIERS-OTHER COSTS 3,100 5 101 CASH 80,00 101 CASH 45,800 461 CAPITAL STOCK-COMM 80,000 To record payments on account for equipment and for shop supplies inventory. To record issue of common shares at par. 17 1231X1 704 EQUIPMENT DEPRECIATION 6,100 6 105 ACCOUNTS RECEIVABLE 757,800 172 EQUIPMENT-ACCUMULATED DEPRECIATION 6,100 505 SERVICE REVENUE FROM CONTRACTS WITH CUSTOMERS 757,800 To accrue depreciation expense on shop equipment. To record revenue from maintenance contracts 18 1231X1 710 AMORTIZATION OF LICENSING COSTS 3,200 7 101 CASH 688,200 197 LICENSE 3,200 105 ACCOUNTS RECEIVABLE 688,200 To record amortization of licensing costs To record payments received on account. 19 1231X1 711 AMORTIZATION OF START-UP COSTS 7,760 8 560 SERVICE COSTS-DIRECT-CREW WAGES 231,340 217 START-UP COSTS 7,760 101 CASH 231,340 To record amortization of start-up costs To record accrual and payment of crewwages 20 123 1X1 821 INCOME TAX EXPENSE 3,250 314 INCOME TAX PAYABLE 3,250 9 561 SERVICE COSTS-INDIRECT-SHOP WAGES 98,000 To record income tax expense for 20X1. 101 CASH 98,000 To record accrual and payment of shop wages Totals 2,476,874 2,476,874 10 611 SELLING & ADMIN-OFFICERS SALARIES 130,000 612 SELLING & ADMIN-OTHER SALARIES 62.040 609 SELLING & ADMIN-PROFESSIONAL FEES 4,850 607 SELLING & ADMIN-SUPPLIES 5,309 610 SELLING & ADMIN-INSURANCE 4,890 615 SELLING & ADMIN-PAYROLL AND OTHER TAXES $9,130 631 SELLING & ADMINISTRATIVE-OTHER 6,80 302 ACCTS PAY-SUPPLIERS-OTHER COSTS 8,000 101 CASH 235,019 To record accrual and payment of S&A expenses.Income Tax Worksheet Income Taxes: Income before taxes per client 15,746 (include all adjusted entires that impact operating income in this space This will be the adjustements such as start up cost; supplies adj; prepaid insurance; and wage payables adjustment. Adjusted Operating Loss Before Taxes $ (12,775) NOL Tax Benefit Tax Rate 21% NOL Tax Benefit Adjustment Net Loss You will need to reverse the previously recorded income tax payable entry. and then record the NOL tax asset. Based on discusssions with management and their forecasts for the next few years COE and Lane's tax experts have determined that they are comfortable with estimating that about 65% of this tax benefit is likely to be realized. Consequently, they have suggested that the following adjustment is needed to record the valuation allowance to offset the NOL tax asset. See FASB ASC 740-10-30-5 Need to record the valuation allowance for the NOL tax asset