Can you help me create an income statement and balance sheet?

AST RECORDS FORMATION ANSWER OWNERSHIP % BASIS IN AST STOCK INTEREST (by shareholder) AST BASIS IN ASSETS RECEIVED SIMON THEODORE ALVIN DOES THE FORMATION PASS THE SECTION 351 TESTS? LIST YOUR ANSWER TO EACH TEST 1 2 3 AST RECORDS GAAP BASED TRIAL BALANCE AS OF DECEMBER 31, 2012 CASH INVESTMENTS, AT FMV ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS INVENTORY INVENTORY RESERVE COMPUTERS - CONTRIBUTED COMPUTERS - PURCHASED MACHINERY - CONTRIBUTED MACHINERY - PURCHASED SOFTWARE - PURCHASED OTHER EQUIPMENT - PURCHASED ACCUMULATED DEPRECIATION - COMPUTERS CONTRIBUTED ACCUMULATED DEPRECIATION - COMPUTERS PURCHASED ACCUMULATED DEPRECIATION - MACHINERY CONTRIBUTED ACCUMULATED DEPRECIATION - MACHINERY PURCHASED ACCUMULATED DEPRECIATION - OTHER EQUIPMENT PURCHASED ACCUMULATED DEPRECIATION - SOFTWARE PURCHASED INTANGIBLES EQUITY INVESTMENT IN DAVECO WAGES PAYABLE - EMPLOYEES WAGES PAYABLE - SIMON WAGES PAYABLE - THEODORE WAGES PAYABLE - ALVIN WITHHOLDING TAXES PAYABLE ACCRUED PAYROLL TAXES ACCRUED VACATION PAYABLE ACCRUED WARRANTY ALLOWANCE FOR SALES RETURNS ACCRUED RENTAL ACCOUNTS PAYABLE LONG-TERM DEBT DEFERRED REVENUE FEDERAL INCOME TAXES PAYABLE NOTES PAYABLE OWNERS CONTRIBUTIONS DISTRIBUTIONS TO OWNERS OTHER COMPREHENSIVE INCOME - INVESTMENTS RETAINED EARNINGS GROSS SALES SALES RETURNS INCOME FROM EQUITY METHOD INVESTMENT COST OF GOODS SOLD (GAIN)/LOSS ON SALE OF FIXED ASSETS (GAIN)/LOSS ON SALE OF INVESTMENTS INTEREST INCOME DIVIDEND INCOME FROM INVESTMENTS INTEREST EXPENSE MEALS & ENTERTAINMENT PENALTY EXPENSE PROPERTY TAX EXPENSE PAYROLL TAX EXPENSE REPAIR EXPENSE ADVERTISING EXPENSE RENT EXPENSE OFFICER LIFE INSURANCE PREMIUM EXPENSE BAD DEBT EXPENSE ACCOUNTING FEES LEGAL FEES FEES PAID TO ALVIN WARRANTY EXPENSE INSURANCE EXPENSE DEPRECIATION EXPENSE VACATION EXPENSE WAGES EXPENSE FEDERAL TAX EXPENSE 2,352,750 3,685,950 325,000 (12,600) 576,550 (24,000) 36,000 175,000 8,000,000 250,000 1,000,000 (23,000) (26,736) (428,571) (38,194) (75,000) 495,000 (54,000) (6,000) (4,000) (5,000) (12,500) (7,580) (75,600) (73,459) (12,450) (9,000) (99,500) (900,000) (55,600) (1,603,788) (9,000,000) (1,685,257) 1,000,000 (685,950) (13,450,650) 95,460 (90,000) 6,500,950 115,476 (70,000) (145,000) (198,645) 336,000 50,000 3,000 112,000 98,000 47,500 190,000 99,000 3,250 15,600 17,500 3,500 75,000 73,459 95,465 906,883 105,000 429,000 1,603,788 - AST RECORDS ASSETS CONTRIBUTED TO FORM AST RECORDS FY 2012 ------------FROM SIMON--------------- ------------FROM THEODORE--------- ------------FROM ALVIN--------------FMV TAX BASIS FMV TAX BASIS FMV TAX BASIS CASH INVESTMENT A ACCOUNTS RECEIVABLE INVENTORY MACHINERY TAX ACCUMULATED DEPRECIATION COMPUTERS TAX ACCUMULATED DEPRECIATION INTANGIBLE ASSETS 75,000 125,000 125,000 65,000 1,750,000 400,000 75,000 100,000 125,000 40,000 2,500,000 (2,500,000) - 60,000 60,000 75,000 ### 35,000 25,000 36,000 (36,000) - 300,000 SERVICES TOTAL CONTRIBUTED DEBT NET CONTRIBUTED ASSETS CONTRIBUTED WITHOUT DEPR BOOK DEPR NET ASSETS CONTRIBUTED BOOK 5,000 75,000 2,540,000 340,000 (900,000) (900,000) 1,640,000 (560,000) 500,000 500,000 95,000 ### 95,000 1,940,000 131,000 (357,143) (12,000) 1,582,857 - 119,000 80,000 80,000 5,000 5,000 ### 5,000 5,000 - - 5,000 1,706,857 AST RECORDS SALES OF FIXED ASSETS FY 2012 SALE IS ON DECEMBER 31 SALE IS FROM THE CONTRIBUTED MACHINERY ACCOUNT SALES PRICE 1,700,000 BASIS SOLD 2,500,000 BOOK ACCUMULATED DEPRECIATION NET BOOK BASIS BOOK LOSS ON SALE (684,524) 1,815,476 (115,476) AST RECORDS DEBT AND NOTES PAYABLE CALCULATIONS FY 2012 DATE BORROWED PRINCIPAL BALANCE INTEREST RATE ANNUAL INTEREST EXPENSE MONTHLY INTEREST MONTHS OUTSTANDING IN AST YEAR INTEREST EXPENSE TO AST CONTRIBUTED DEBT FROM SIMON DEBT BORROWED DURING FY 2012 2/1/12 7/1/12 TOTAL (900,000) (9,000,000) 8.00% 6.00% (72,000) (540,000) (6,000) (45,000) 11 6 (66,000) (270,000) (336,000) AST RECORDS BOOK DEPRECIATION EXPENSE FY 2012 ACQUISITION DATE COMPUTERS - CONTRIBUTED COMPUTERS - PURCHASED MACHINERY - CONTRIBUTED MACHINERY - PURCHASED SOFTWARE - PURCHASED OTHER EQUIPMENT - PURCHASED 2/1/12 7/15/12 2/1/12 8/15/12 7/15/12 8/15/12 BOOK LIFE BOOK METHOD 3 3 7 7 3 5 S/L S/L S/L S/L S/L S/L BASIS FOR DEPRECIATION 36,000 175,000 2,500,000 8,000,000 250,000 1,000,000 ANNUALIZED FY 12 BOOK DEPR. EXPENSE 12,000 58,333 357,143 1,142,857 83,333 200,000 ACTUAL MONTHS 11.0 5.5 11.0 4.5 5.5 4.5 ACTUAL FY 12 BOOK DEPR EXPENSE 11,000 26,736 327,381 428,571 38,194 75,000 906,883 BEGINNING ACCUM DEPREC. 12,000 357,143 - YEAR END ACCUM DEPREC. 23,000 26,736 684,524 428,571 38,194 75,000 1,276,026 LESS: SALE TRANSACTION (684,524) - FINAL YEAR END ACCUM DEPREC. 23,000 26,736 428,571 38,194 75,000 591,502 AST RECORDS ROLLFORWARD OF DAVECO ACTIVITY FY 2012 AST OWNS 45% OF DAVECO ORIGINAL INVESTMENT BY AST RECORDS INCOME FROM DAVECO (AT 45%) 450,000 90,000 DISTRIBUTIONS FROM DAVECO (45,000) ENDING INVESTMENT BY AST 495,000 AST RECORDS SALES OF INVESTMENTS FY 2012 PURCHASE DATE SALE DATE ORIGINAL COST SALES PRICE (GAIN)LOSS INVESTMENT A 12/31/10 12/31/12 100,000 185,000 (85,000) INVESTMENT D 9/15/12 12/31/12 130,000 90,000 40,000 INVESTMENT F 11/14/12 12/31/12 165,000 190,000 (25,000) (70,000) TOTAL PROJECT NARRATIVE INFORMATION ACCY 171 SUMMER 2016 Simon and Theodore are father and son and have each been operating reasonably successful businesses independent of each other. They have recently concluded that their individual strengths would be more successful if they combined their businesses together and have been formulating a plan to bring their businesses together as a single entity. They have been operating their businesses as separate sole proprietorships but now want to both put them together and obtain some legal liability protection. Alvin is Theodore's best friend since grade school. Alvin would like to participate in the new business venture but has limited cash to contribute. He has offered to do all the start up accounting and legal work in exchange for a portion of the new business. Even though Simon is not sure about Alvin's work ethic, he agrees to let Alvin become part of the new business. The assets and liabilities they each contribute are included in the excel spreadsheet under the tab \"Assets Contributed\". On February 1, 2012, the contributions are finally completed and all of the legal agreements signed by all of the parties. Simon contributed his existing business, with the exception of the land and building he owns where the business will be operated. Theodore contributed all of his business assets and liabilities. Alvin contributed a little bit of cash and his services prior to the final contributions which were valued at $75,000. The new entity was formed in January 2012 in anticipation of the contributions by each party. The debt contributed by Simon was borrowed from the bank in December 2011 and the cash was used by Simon to remodel his house. The debt was secured by property that was eventually contributed to AST, not by Simon's house. As it turns out, at least looking at the trial balance included in the excel spreadsheet (tab \"Trial Balance\"), the combining of the two businesses has resulted in increased sales and profits and the new business entity is very successful. Alvin turns out to be a pretty good financial accountant and has completed the trial balance as of the end of the year. You have had a number of discussions with Alvin and have found out the following information about the new business. The name of the company is AST Records. The business is manufacturing vinyl records for various recording artists. As a part of the business, the company not only manufactures the vinyl albums but also does the art work for the album cover. Alvin has chosen the accrual method for book purposes and sees no reason why the tax returns should be anything different. Inventory is a significant part of the revenue production process. Since the entity was just formed at the beginning of the year, there were no reserves or other accruals as of the start date of February 1, 2012. Because the company has turned out to be more successful than they ever planned, there is a significant amount of cash on the balance sheet at the end of the year. Simon has taken some of the extra cash and made investments in various stocks (other than DaveCo, all are less than 20% ownership of the stock investment) and bonds to provide at least some interest and dividend income. All of the investments are presented at fair market value using the \"Available for Sale\" accounting method. Alvin knew enough about this method that he correctly included the increase in value from original cost in the Other Comprehensive Income account (but did not do so net of tax which you can safely ignore for purposes of this exam). During the year, some of the equipment contributed by Simon was sold for a book loss. Additionally, Simon sold some investments for gains and losses. All of the necessary details are included on tabs \"Fixed Asset Sales\" and \"Sale of Investments\". In August, Simon's friend Dave approached Simon with an idea for a related business. Dave thought opening a recording studio for local bands would fit well with the existing vinyl record business and proposed a new venture. Simon was initially skeptical but agreed to form a new corporate subsidiary of AST Records along with Dave. AST contributed $450,000 in cash to the new entity in exchange for 45% of the common stock of the new company called \"DaveCo\". Dave contributed some assets and his services for the remaining 55% interest. Alvin knows that if you own between 20% and 50% of a business, then you account for it using the Equity Method for GAAP, but he has no idea what you do for tax purposes. The details on DaveCo are included on tab \"DaveCo Rollforward\". You do NOT need to worry about the formation of DaveCo as that is not part of this exam. As mentioned earlier, Simon retained ownership of the land and building where AST Records is located. AST pays Simon monthly rent of $9,000 that is payable on the first of each month for the PRECEEDING month. Alvin, Simon, and Theodore are all employees of AST Records as well as owners. Simon made a choice early on that all employees would be paid once per month on the 1st of each month for the past month's work. This was so he would never pay anyone in advance for work they had not yet done. AST Records has four employees in addition to Alvin, Simon and Theodore, all of whom have been with the company since February 1, 2012. None of the accrued vacation balance at the end of the year was paid within 2 months of year end. During the year, the company needed some new fixed assets. Details of the acquisition dates and book depreciation calculations are included on the tab \"Book Depreciation\". Here are some details to help you finish the forms (do not get caught up in googling things such as whether I have the proper zip code, etc. - that just wastes your time): AST FEIN: 99-7654321 AST Records 1234 Album Drive Las Vegas, NV 80024 Simon and Theodore live together at 4567 Chipmunk Lane Las Vegas, NV 80024 Alvin lives at 9876 Burbank Road Las Vegas, NV 80025 Below are the Social Security numbers for each of the owners: Simon Theodore Alvin 555-55-5556 333-33-3334 111-11-1112 For any tax calculation, use a flat rate of 35%. Do not use the graduated rates