~~~~~Income Statement~~~~~ You only need to finish IS tab. Actually the IS almost done, just need finish earnings per share part at the bottom under IS tab. 
Do 11 Steps for 2014, each Step in separate Excel Tab (following the Year 2 & Year 1 Tabs below, unchanged except for Members names above) in order & each titled as shown below (in blue): 1) JE's & AJE's: Record with Date, Reference # & explanation (with calcs), rounding to $'s (no cents). 2) GL: Post all entry info to accounts in proper FS order & use "Beg" or JE Ref. # for each amount. (Important Note: Input all real acct beg. balances & check that GL balances before posting 2nd Year JE's). 3) ATB: Prepare Adjusted Trial Balance at 12/31/14 with all accounts in FS order. 4) Tax AJE: Prepare Tax Worksheet (sample in Project BB Tab) and update Steps 1 to 3 for Tax AJE. 5) IS: Prepare Income Statement for 2014 (including comparative, side-by-side columns) . 6) SSE: Prepare 2014 Statement of Stockholders' Equity (with comparative top/bottom schedules & no CI) 7) BS SE: Prepare Stockholders' Equity Section of 12/31/14 BS (with comparative, side-by-side columns). 8) SCI: Prepare 2014 Statement of Comprehensive Income (with comparative side-by-side columns). 9) SCFs: Prepare 2014 SCFs using Direct Method (with comparative columns & Indirect Method in Notes). 10) Selective Notes: Prepare only: 1) Accounting Policies, 2) EPS Reconciliation, 3) All SCFs disclosures. 11) CJE: Prepare Closing Entry (only simpler one, without Income Summary account). Note: Project steps require neither a complete BS (only SE Section) nor a 10-Column Worksheet. Events for Owl Co., during 2014 (their 2nd Fiscal Year), are as follows: 1/1/2014 Pay bond interest, then 60% of bonds convert (Owl uses BV Method; MV: $2.70 CS & 105 Bonds) 2/15 Receive MJM div (70% DRD for tax). Client billed $10k on 6/21/13 pays $2,000 and "skips town". 3/5 Collect all accounts receivable to date, and pay last year's divs and income tax (as estimated). 4/29 Complete work for advance fees received 6/21/13, pay consultants, & pay bldg note interest. 5/27 Pay $1,000 taking Zip Co. to dinner & sign 36-month consulting contract for $2.6 million. Reissue 80% of remaining treasury shares at $3 each, which remains at $3 per share thru 12/31/14. 6/6 Receive semi-annual PA State bond interest and pay $500 to City of Phila. for trash violations. Establish an employee pension plan with 2014 as 1st year. Funding to be based on 2% of total book revenues at each year end. For tax, assume only amount actually funded is deductible. 7/2 Pay semi-annual bond interest payment & pay $10,000 to Phila. for real estate & BU&O taxes. Buy $25,000 of supplies on credit because only $1,000 of supplies are now left. 8/30 Pay off car loan & interest to date plus $600 bank penalty for late principal payment. Receive $1,000,000 advance fees; by 12/31, 55% of work is completed & consultants are paid. 9/28 Pay $9,000 for next 6-months of executive life insurance premiums and pay to renew another 18 months of building insurance at a 10% increase from the last rate. 10/1 Pay $238,000 to Lessor Co. as 1st annual payment on the signing of a 3-year, noncancelable computer lease to begin 11/1. Each annual payment includes $25,200 for tax and insurance, and Owl will pay maintanance cost for the equipment. Lessor Co. bought the computers for $700,000, used an implicit lease rate of 8%, and expects the life of the computers to be 4 years before they become obsolete. Owl's incremental borrowing rate is 10%. If capitalized, Owl will use the simplest method to expense. Assume that there are no book-tax differences with this lease. 11/13 Incur $429,000 of costs for 36-month Zip contract, paying 70% now, rest on credit, & progress bill Zip Co. for 90% of cost to date; at 12/31, estimated future costs are $1,771,000. 12/19 Receive PA bond interest and fund 90% of estimated pension expense based on revenues to date. 12/31/14 XYZ declares divs of $20k on $150k NI & MJM declares a 20% stock div with a NL of ($100k). Estimate: Income tax using US Rate Schedule; 10% PA; 9% Phila; & $5,000 late payment penalties. (Use accrual basis for tax, prepared on the Tax Worksheet attached in the Acct Cycle Project BB Tab) Estimate 3.5% of AR is uncollectible & $3,000 of supplies are left; also declare $35k cash divs. Investment Market Values: PA bond = 103, XYZ PS = $99, & MJM CS = $4, Owl CS = $3. dcrease, unrealized loss 2/28/2015 Pay 2014 dividends, declare and issue a 2 for 1 stock split, and issue 2014 FS's the next day. Acct Cycle Steps #3 - 5 Temple University Acct 3512, Spring 2014 Accounting Cycle Project (Part1) Professor Marco J. Malandra, CPA Owl Co. events, incorporated 1/1/13 in PA, with intent to do consulting & sell stock to the public: 1 1/1/2013 Pays $30,000 for supplies; by 12/31, 55% of these supplies are left. 3 3/13 Pay $150,000 for computers (4-yr life) & $84,000 for furniture (7-yr life); both DDB deprec. Owl uses \"nearest full-month\" convention for all depreciation & rounds to the nearest dollar. 4 4/30 Buy building (20-yr life, S-L) for $480,000 (of which 15% is land), with 20% down & a 7%, 8-yr note, interest paid each 4/30; also pays $27,000 for 18 months building & risk insurance. 5 5/9 Hire consultants to be paid of 20% of fee revenue whenever recorded during next 24 months. 6 5/18 A virus destroys 20% of computers (not to be depreciated-immaterial), not covered by insurance. 7 6/21 Complete 2 jobs, mail invoices of $235,000 & $10,000, receive $185,000 in advances for 3 other jobs (by 12/31, 2 are done, representing 70% of fees), & pay consultants as contracted. 8 7/1 Issue 4-yr, $200,000, 6% semi-annual bonds at 98 (use S-L), convertible to 24,000 CS shares. 9 8/1 Declare 3 for 1 common stock split & shareholders vote a corresponding authorized increase. 10 9/1 Buy 15,000 common shares from its shareholders at $3.00 MV (use most common method). 11 10/1 Reissue 5,000 treasury shares at $3.50 MV and retires 5,000 treasury shares. 12 11/1 Grant options, that will vest in 24 months, to officers to buy 50,000 common shares for $3.50 each (MV is $3.50), valued at $84,000 using Black-Scholes option pricing model. 13 12/1 Buy: 5-yr, 9% $250k PA State bond at 7% market rate, to be held 5 years & use GAAP amortization. 1,000 shares of 8% cumulative PS from XYZ Co. ($100 Par, $105 MP) 20,000 shares MJM Co. common ($2 Par, $8 MP; 100k auth; 60k outstanding before purchase) On 12/31/13 MJM declares divs (to be paid on 2/15) of $20k on NI of $150k. On 12/31/13 Market Prices are: Bonds at 96, PS at $106, & CS at $9. 14 12/28 & 31 Receive $135,000 from client billed 6/21 & at 12/31 estimate that $10,000 of AR will never be paid. 15 12/31 Buy $90,000 BMW(4-yr UL, $30k SV, SYD Method) for 10% down & 8% note, payable in 6 months. Pay consultants per contract; issue 30% CS div(MV $3.50); & declare $30k cash div payable 3/5. Estimate 45% US, PA, & Phila. income tax rate on all NI. After CS div, MV = $2.69 ($3.50/130%). Acct Cycle Step #1 9,188 Ref. # Date 1 1/1/2013 Owl Co. - Dr General Journal 2013 Accounts Cash Debits 650,000 Credits Dr g b d f a 2/25/2013 472,067 177,933 e a 55,500 30,000 465,000 200,000 3,500 175,000 2,933 122,750 362,067 2,500 374,500 c 83,600 23,920 13,500 13,500 83,600 83,600 83,600 12,000 1,875 f g h 1,875 37,500 i 83,600 12,000 1,580 1,000 1,580 1,000 7,000 10,000 5,000 i 8,750 21,250 27,750 24,420 23,920 83,600 12,000 1,875 h 74,900 30,000 23,920 13,500 c d f 374,500 74,900 30,000 8,750 21,250 27,750 24,420 24,420 b 15,000 129,500 a 7,000 1,580 1,000 5,000 5,000 37,500 37,500 7,000 j 7,000 7,000 10,000 10,000 j 7,000 10,000 10,000 10,000 158,160 k 71,172 71,172 k 71,172 71,172 71,172 71,172 86,988 86,988 1,790,250 391,567 391,567 Adjustments Entry Ref # 2,026,021 2,026,021 Adj Trial Bal. 158,160 158,160 Income Stmt - Adjs - Calculations: 15 a 16 650,000 b c 1,699,430 1,699,430 Balance Sheet 18 20 21 22 150,000 84,000 23 24 Cash 234,000 25 - - - AJE Amts Interest Exp: Bond 200,000 *6%*6/12+4k/4yrs*6/12 = Bldg Note: 384,000 Bldg NP*7%*8/12 months = Supplies Exp: 30,000 * 45% used = Depr.Exp: Bldg 408,000 / 20 yrs * 8/12 months = Computers 120,000 / 4 yrs * 2 * 10/12 months = Furniture 84,000 / 7 yrs * 2 * 10/12 months = Insur. Exp: 6,000 / 12 months =Prepaid * 8/18 months = 27,000 Consultation Fees: 185,000 Advance * 70% completed = PA Bond Int. Rev: 270,792 Bond BV * 7% Market * 1/12 months = ABC Int. Rec.& Amortiz.: 250k Par * 9% SR * 1/12 = AFS FV Adj: shs 1,000 XYZ PS * (105cost vs 106 yr-end MV)= MJM CS - 25% Equity Adj: ( 150,000 NI - Divs 20,000 ) * 25% = Officer Stock Option Comp: 84,000 Model value * 2/24 months = ADA/Bad Debt Exp: Estimate of Bad Debt Estimated Income Tax Exp: NI before Income Tax: 158,160 *45% est.= d e f 30,000 Buy office supplies. Computers Furniture Buy Computers (4-year life) & furniture (7-year life); both using Double-Declining Balance. Cr 55,500 30,000 465,000 200,000 3,500 15,000 30,000 3/13/2013 Dr 175,000 2,933 122,750 362,067 2,500 245,000 17 Cash 3 Balance Sheet Cr 131,808 110,000 105,000 1,000 16,500 15,000 270,496 192,500 72,000 408,000 120,000 84,000 90,000 175,000 2,933 122,750 362,067 2,500 Trial Balance 175,000 2,933 97,500 374,567 Supplies 500 Dr 129,500 19 2 13,500 12,000 295 32,500 185,000 e 30,000 465,000 200,000 Income Stmt Dr Cr 131,808 110,000 105,000 1,000 16,500 15,000 270,496 192,500 72,000 408,000 120,000 84,000 90,000 1,000 h For the Year Ending 12/31/13 Adj Trial Bal. Cr - Preferrred Stock Additional-Paid-In-Capital - PS Common Stock Additional-Paid-In-Capital - CS Issue 65,000 shares of Common Stock (PV $1, MV $7.50) & 1,750 shares of 5% Premium Stock (PV $100, MV $105), convertible into 20,000 shares of CS for lump-sum price: CS: (65k*$7.50) / [(65k*$7.50) + (1,750*$105)] * $650k lump sum= PS: (1,750*$105) / [(65k*$7.50) + (1,750*$105)] * $650k lump sum= 10 Column FS Worksheet - Adjustments Cr 131,808 110,000 105,000 Cash Accts Rec. AFS Secs. FV Adj Supplies 30,000 PreP.Insur. 27,000 HTM Secs. 270,792 MJM CS 160,000 Land 72,000 Building 408,000 Equipment 120,000 Furniture 84,000 Vehicles 90,000 Un. Fees Divs Pay. Notes Pay. Bonds Pay. Disc.-B/P 4,000 Pfd Stock APIC-PS Com. Stock APIC-CS PIC-TS Treas.Stk 15,000 Consulting Fees Cons. Exp 74,900 Ex. Loss 30,000 Divs-$(PS) 8,750 Divs-$(CS) 21,250 Divs-CS 27,750 Interest Exp Interest Pay. Supply. Exp Accum Dep Deprec. Exp. Insur. Exp Bond Interest Rec. Bond Interest Rev. Unrealized Holding Gain-SE Dividend Receivable-MJM Revenue from MJM Stock Officer Compensation Exp. Paid-in-capital-Stock Options Allowance for Doubtful Accts Bad Debt Exp Net Income before Income Taxes Inc Tax Exp Inc Tax Pay Net Income (plug to balance) Totals 1,790,250 Receive $650,000 for issuing 65,000 common shares (PV $1.50, MV $7.50) & for 1,750 5% preferred shares (PV $100, MV $105), convertible into 20,000 common (CS) shares. Articles of Incorporation include that 200,000 common shares & 25,000 preferred shares are authorized. 2 2/25 Owl Co. - Trial Balance Accounts g h i j k 6,500 17,920 13,600 50,000 20,000 24,420 13,500 83,600 12,000 129,500 1,875 1,580 295 1,000 32,500 7,000 10,000 71,172 Note: All AJE's in Worksheet would be recorded in Journal (#15-25) & posted to Ledger (just like JE's). 4 4/30/2013 Building Land 408,000 72,000 Cash Note Payable Buy building (20-year life, SL), with 20% down & 7% (pay annually), 8-year Note. 96,000 384,000 Amortization Schedule-Effective interest method PA State Bond: 5-yr 9% Stated, 7% Market: HTM Sec. Dates 5 4/30/2013 Prepaid Insurance 27,000 Cash Rec. Interest Rev. SR * PV MR*Bond BV Premium Bond Book Amortization Value 12/1/2013 purchase Cash 27,000 270,792 6/1/2014 7 6/21/2013 Accounts Receivable Cash Consultant Expense Complete 2 jobs, $235k & $10k, & pay consultants 20%; Receive $185k in advance for 3 jobs. Issue 4-yr, $200,000, 6% semi-annual bonds at 98 (use S-L), convertible to 24,000 CS shares. 7/1/2013 Cash Discount on Bond Payable Issue 4-year, $200,000, 6% semi-annual bonds at 98, convertible into 24,000 common shares. 8 1,899 11250 9,285 1,965 11250 11250 9,216 9,145 2,034 2,105 261,288 259,183 11250 9,071 2,179 257,004 11250 8,995 6/1/2018 11250 8,916 2,334 252,415 12/1/2018 245,000 136,000 49,000 Consulting Fees Unearned Fees 267,185 9,351 6/1/2016 12/1/2016 30,000 11250 12/1/2017 Computers 269,019 1,834 12/1/2015 30,000 1,772 9,416 6/1/2017 5/18/2013 Extraordinary Loss-Computer Virus Computer virus destroys 20% of computers; unusual & infrequent event not insurance-covered. 9,478 11250 6/1/2015 6 11250 12/1/2014 Pay for 18 months of building & risk insurance. 11250 8,835 2,415 250,000 2,255 265,286 263,321 254,749 245,000 185,000 196,000 4,000 Bond Payable 200,000 9/1/2013 9 Treasury Stock Buy 15,000 common shares from shareholders at $3 MV using Cost Method for treasury stock. 45,000 Acct Cycle Step #6 Cash Owl Co.- Financial Statements 45,000 Statement of Stockholders' Equity Income Statement 10 10/1/2013 Cash Common Stock Additional-Paid-In-Capital - CS 17,500 2,500 12,500 Paid-In-Capital - TS Treasury Stock 2,500 30,000 Reissue 5,000 treasury shares (PV $ .50, MV $3.50; Cost Method $3), & retire 5,000 treasury shares. 12/1/2013 11 Held to Maturity Securities Available for Sale Securities Investment in MJM Co. 270,792 105,000 160,000 Cash 535,792 Buy: ABC 5-yr $250k 9% bond(7%mv); 1k 8% XYZ cumPS(100pv/105mv); 20k(25%)MJM CS(2pv/8mv) 12 12/28/2013 Cash Collect from $235k client billed on 6/21 & estimate that the $10,000 client is uncollectible. 13 12/31/2013 14 12/31/2013 135,000 Accounts Receivable 135,000 Vehicles 90,000 Cash Note Payable For the Year Ending 12/31/13 For the Year Ending 12/31/13 Revenue: Consultation Fees MJM Co.Revenue 1 Bond Interest 3 Expense: Ofc.Comp. 7,000 4 Consulting 74,900 Supplies 13,500 Insurance 12,000 Deprec. 83,600 5 Bad Debt 10,000 Interest 24,420 6 Operating Income before Taxes Income Tax Expense 7 Income-Continuing Operations Extraord. Loss (net of tax) 8 Net Income Earnings per share: Basic From Operations $0.38 Extraordinary Loss $(0.07) 9,000 81,000 EPS PS & CS PS & CS Treasury RE & o/s # shs ParValue APIC Stock Compreh. (CS PV=$1.50; PS PV=$100) At 1/1/12 Issue CS 65,000 $97,500 $374,567 CS Issue PS 1,750 175,000 2,933 PS 130,000 (CS PV $ .50) 9b 3/1 Split (15,000) $(45,000) 10 Buy TS " Issue TS 5,000 2,500 15,000 " Retire 5,000 shs TS (2,500) (12,500) 15,000 7,000 4 Stk Options Compreh. (225,420) 11 AFS-unrlz'd gain 188,160 Net Income (84,672) 9a Cash Div-PS 103,488 Cash Div-CS (16,500) 9b CS Div 55,500 27,750 $2,500 PIC-TS $86,988 CS 12/31: 240,500 $122,750 $364,567 $(15,000) Diluted PS 12/31: 1,750 $175,000 $2,933 Compreh.I. $0.28 TS 12/31: 5,000 $7,000 SO's Statement of Cash Flows $(0.04) For the Year Ending 12/31/13 $0.24 37,500 1,580 $0.31 9 Buy BMW (4-yr life, $30k Salvage, SYD Method), signing 8%, 6-month Note. Current Assets Cash Accounts Rec. (net) Div. & Interest Rec. Avail-for-Sale Securities Supplies Prepaid Insurance Total Current 25,900 8,750 21,250 27,750 Cash Common Stock Dividends Payable 25,900 27,750 30,000 Pay consultants; Issue 30% common stock div ($.50pv/$3.50mv); Declare $30k cash divs payable 2/1. (CS shares issued: 30% * (65k * 3 - 15k + 5k) = Note: 20% Consultant Expense is based on Fee Revenue recorded in Adjusting Entries on 12/31. 55,500 "Big" CS div @ $ .50 PV) December 31, 2013 131,808 100,000 6,875 106,000 16,500 15,000 $376,183 13 10 14 Noncurrent Assets 3,652,942 3,652,942 Held-to-Maturtiy Secs. MJM Co. Investment Land Building Equipment Furniture Vehicles Accum. Depreciation Total Noncurrent $1,153,396 Total Assets Dr | Cr Balance Check: 12 $1,529,580 270,496 3 192,500 1 72,000 408,000 120,000 84,000 90,000 (83,600) 5 Requirement #4 Current Liabilities Unearned Fees $55,500 Dividends Payable 30,000 15 Interest Payable 23,920 16 Notes Payable 81,000 6 Income Tax Payable 71,172 7 Total Current $261,592 Bonds Payable (net) $196,500 16 Notes Payable 384,000 6 Total Liabilities $842,092 Stockholders' Equity Preferred Stk $175,000 17 Paid-in-Capital-PS 2,933 Common Stk 122,750 18 Paid-in-Capital-CS 362,067 Paid-in-Capital-TS 2,500 Paid-in-Cap-Stk Options 7,000 4 Retained Earnings 29,238 Treasury Stock (15,000) 10 Other Compreh. Gain 1,000 11 Total SE $687,488 Total Liabs & SE $1,529,580 $472,067 177,933 $1,000 86,988 (8,750) (21,250) (27,750) $29,238 $1,000 Operating Activities-Direct Method Advance Fees Accts Receivable Collected Consultant Fees Building Insurance Office Supplies Net Operating Investing Activities Building Down Payment Equipment Payment Furniture Payment Vehicle Down Payment Purchase ABC Co. Bonds Purchase XYZ Co. Pfd Stock Purchase ABC Co. Bonds Net Investing Financing Activities Common & Pfd Stock Issued Bond Issued Issue & sell Treasury Stock Net Financing Net Change in Cash Beginning Cash Ending Cash Balance Sheet Consultant Expense Dividends (PS) - Cash Dividends (CS) - Cash Dividends - CS shares Totals $374,500 19 20 (45,000) 17,500 7,000 1,000 86,988 (8,750) (21,250) $687,488 $185,000 135,000 (74,900) (27,000) (30,000) $188,100 $(96,000) (150,000) (84,000) (9,000) (270,792) (105,000) (160,000) $(874,792) $650,000 196,000 (27,500) $818,500 $131,808 0 $131,808 Owl Company - Notes to Financial Statements 12/31/13 (Note: Operating Section - Indirect Method, omitted herein, is Required in Year 2 FS Notes) Acct Cycle Step #2 Owl Co. - General Ledger 1. Accounting Policies: Owl's fiscal year ends on 12/31, and the financial statements are prepared in conformity with accounting principles generally accepted in the United States, requiring management to make estimates and assumptions that affect the reported asset and liability amounts, and the discolosure of contingent liabilities at the Balance Sheet date. Actual results could differ from those estimates. Accounts receivable are recorded at the invoiced amount and shown net of allawances for doubtful accounts. The allowance for doubtful accounts represents management's estimate of the amount of probable credit losses. Account balances are written off against the allowance when the receivable is determined to be uncollectible. Owl's primary revenue is consulting, recognized on delivery of service to clients, net of applicable discounts. For any long-term contracts, revenue will be recognized using the percentage of completion method, on the cost-to-cost basis. 12/31/2013 Cash 650,000 136,000 196,000 17,500 135,000 30,000 234,000 96,000 27,000 45,000 535,792 9,000 25,900 1; 2 7; 3 8; 4 10; 5 12; 9 11 13 14 7 Accts Receivable 245,000 110,000 135,000 12 11 11 Avail. For Sale Secs. 105,000 3 11 Held to Maturity Secs. 270,792 5 Investment in ABC 160,000 Supplies 30,000 Prepaid Insurance 27,000 2. On 12/1/2013 Owl bought 20,000 shares of MJM Co. common stock, representing 25% of MJM outstanding common shares. Owl has significant influence over MJM and is using the Equity Method to report its MJM Investment in common stock, resulting in Owl reporting on its Income Statement 25% of MJM's Net Income. market rate), with the intent to hold until maturity. 131,808 Computers 150,000 120,000 3 30,000 6 14 Building 408,000 4 Vehicles 90,000 3 Unearned Fees Land 4 3. On 12/1/2013 5-year, 9%, $250,000 PA State bonds were purchased at a premium for $270,792 (based on an 10 market rate), with the intent to hold until maturity. 4. Officer compensation includes stock options granted 11/1/2013, valued at $84,000 using Black-Scholes option pricing model, that will vest in 24 months from the grant date. These options are convertible to 65,000 shares of Owl common stock at a $2.69 Exercise Price (50,000 shares with $3.50 EP at grant adjusted by a 30% CS dividend on 12/31) Accts Payable Dividends Payable 15 185,000 7 Notes Payable 72,000 Furniture 84,000 Bond Payable 384,000 4 81,000 13 465,000 200,000 8 8 30,000 5. Depreciation expense on Income Statement is determined using Straight Line & Double Declining Balance Methods. The details and breakdown of depreciable assets are as follows: Discount - Bond Pay. 4,000 Type Historical Cost Building Useful life Accumulated $ 408,000 20 years 120,000 4 years 84,000 7 years Computers Furniture Vehicles 90,000 4 years 702,000 Preferred Stock 175,000 10 Common Stock 2,500 Addit-Pd-In-Cap.- PS 2,933 1 1 8 10 Addit-Pd-In-Cap.- CS 12,500 374,567 1 97,500 1 10 27,750 14 362,067 Treasury Stock 45,000 15,000 30,000 $196,500 8 year 2,500 $384,000 6 months 2,500 Consulting Fees Consulting Expense 7 49,000 14 25,900 74,900 245,000 7 15 Amount 4 year Pd-In-Cap.- TS 10 Dividends - Cash 8,750 15 Extraord. Loss 30,000 9 Initial Date Methods 5/1/2013 Straight-Line 3/1/2013 Double-Declining Balance 3/1/2013 Double-Declining Balance 12/31/2013 Sum-of-Years-Digits 83,600 6. The details and Bond & Note Payable Loans are as follows: Term 122,750 13,600 50,000 20,000 0 $81,000 Type & Valuation 2013 Interest Exp. & Rate Bond Amortized Discount Cost Building Note Principal BMW Note Principal $6,500 8. On 5/18/13 a virus destroyed $30,000 of computers. This unusual & infrequent type of loss is not covered by insurance, and is being reported at $16,500, net of the $13,500 (45%) tax savings resulting from the loss. Dividends - CS shares 27,750 9. The 2013 earnings per common stock share reconciliation of basic to diluted is as follows: Income Basic: Owl Co. General Journal Accounts Consulting Fees Bond Interest Rec. Revenue from MJM Stock Consultant Expense Extraordinary Loss Interest Exp Supplies Expense Depreciation Expense Insur. Exp Officer Compensation Exp. Bad Debt Exp Inc Tax Exp Divs-PS Cash Divs-CS Cash Divs-CS Stock Retained Earnings To close all nominal accounts at 1st business year-end (6 months) & update Retained Earnings. Extraordinary Loss (net of 45% tax) Net Income available to common shareholders (16,500) $78,238 248,625 b) 248,625 6% convertible bonds (Interest Exp.net of 45% tax) 3,575 c) 8,750 a) Debits 78,000 e) NI available to common + assumed converted shares Notes: Credits 374,500 1,580 37,500 $0.38 $(0.07) $0.31 46,800 d) 5% preferred stock a) Preferred Stock dividends: 1,750 shares * $100 Par Value * 5% annual rate = b) Basic weighted-av.CS shs: 130% * (65,000*8/12*3)+(180,000*1/12)+(185,000*3/12) = $90,563 373,425 $0.24 $8,750 248,625 (All shares restated for 30% CS dividend declared 12/31; all shares restated for 3-1 CS split except CS changes after 8/1) $3,575 46,800 1/2 yr w-av c) Bond 6% interest exp (net of 45% tax): ($200,000par*6%*6/12+$4,000discount/4yrs*6/12)*55% = d) Bond convertible to 24,000 CS shares * 3/1 CS split * 130% CS dividend * 6/12 months (Note #16)= 74,900 30,000 24,420 13,500 83,600 12,000 7,000 10,000 71,172 8,750 21,250 27,750 29,238 Per share effect: 8c/8d= $0.08 resulting in a temporary Diluted EPS of $0.28 Basic & Bond conversion adjs e) Preferred Stock convertible into 78,000 CS shares: 20,000*3 Split*130% CS dividend (Note #17) = Per share effect: 8a/8e= $0.11 resulting in reported Diluted EPS of 78000 $0.24 In addition to these 2 dilutive securities (8d & 8e), the Stock Options are antidilutive, but could become dilutive in the future: Executive CS options convertible into 65,000 CS shares (Note #3: 50,000*130% CS dividend) = 65,000 These options are antidilutive because Exercise price of $3.50 at grat is same as Market price of $3.50 and at year end Exercise Price of $3.50 would be $2.69 (reflecting the corresponding MV reduction of the 30% CS div on 12/31) = to MV. 28,080.0 10. On 9/1/13, 15,000 shares of Owl common stock were purchased at $3.00 market price per share. On 10/1/13, 5,000 of these shares were reissued at $3.50 per share & 5,000 shares were retired, with 5,000 treasury shares remaining. 11. On 12/1/13 1,000 shares of XYZ Co. cumulative 8%, $100 preferred stock was bought at $105. On 12/31/13, the 106 market price results in a $1,000 unrealized gain using Fair Value method, shown in SE as Other Comprehensive Gain. 12. Accounts receivable are shown net of an estimated bad debt of $10,000. 13. Dividend receivable is $5,000, based on 25% of Dividends declared on MJM Co. common stock(see Note #2). Interest receivable is $1,580, based on PA State bond, 7% market rate & effective interest method (see Note #3). Note: All Closing Entries (CJE's) would be recorded in Journal & posted to Ledger (just like JE's and AJE's). Per Share (8,750) a) 94,738 Diluted: Date Shares $103,488 Income from operations available to common shares 26 12/31/13 8% 7. Estimated 2013 income tax at 45% on net income is $71,172, including a $13,500 computer loss tax benefit (Note #8) . Less Preferred Stock dividends Ref. # 7% 0 $24,420 Income before Extraordinary Loss Acct Cycle Step #7 6% (Straight-Line amortization) $17,920 $661,500 14. On 4/30/13 18 months of property & risk insurance were purchased; 10 months remain as a prepaid current asset. 15. Dividends, payable 3/5/14, are $8,750 payable to preferred shareholders (Note #9a) & $21,250 payable to common. 16. On 7/1/13 4-year, 6% (semi-annually) $200,000 value bonds were issued at $4,000 discount, convertible to 24,000 common shares (adjusted to 93,600 by 12/31, based on a 3 for 1 Split on 8/1 and a 130% CS dividend on 12/31). 17. On 1/1/13 1,750 shares of 5% convertible preferred stock were issued (25,000 shares authorized, 1,750 issued & outstanding at a $100 par value), convertible to 78,000 shares of TU common stock (20,000 shares adjusted by a 3 for 1 CS split on 9/1 and a 120% CS dividend on 12/31). 18. On 1/1/13 65,000 common stock shareswere issued (at 12/31, 600,000 shares authorized, 245,500 shares issued, & 240,500 outstanding, see State,emt pf SE, $ .50 par value; originally $1.50 par value, reduced by 3 for 1 CS split). 19. On 4/30/13 20% cash was paid to buy a $480,000 building, with a $384,000 note balance (see Note #6 for terms). 20 On 12/31/13 10% cash was paid to buy a $90,000 BMW, with an $81,000 note balance (see Note #6 for terms). Acct Cycle Step 1 Ref. # 1 Date 1/1/2014 Owl Co. - General Journal 2014 Accounts Interest Expense-Bond Discount on Bond Payable Cash Debits 6,500 Credits Bond Discount = 200000*(100%-98%) 4 yr and semianual so that amortizated in 8 period Discount on B/P = 200000*(100%-98%)/8 500 6,000 7/1/2013 Issued 4-yr, $200000, 6% semi-annual bond at 98 (use-SL) 1/1/2014 pay bond interest yes Bonds should pay semi need entry or not 2 1/1/2014 Bond Payable 120,000 Discount on Bonds Payable Common Stock Paid-in-Capital-CS 2,100 28,080 89,820 56,160.0 year 1 note #16: On 7/1/13 4-year, 6% (semi-annually) $200,000 value bonds were issued at $4,000 discount, convertible to 24,000 common shares (adjusted to 93,600 by 12/31, based on a 3 for 1 Split on 8/1 and a 130% CS dividend on 12/31). year 1 note #18: On 1/1/13 65,000 common stock shareswere issued (at 12/31, 600,000 shares authorized, 245,500 shares issued, & 240,500 outstanding, see State,emt pf SE, $ .50 par value; originally $1.50 par value, reduced by 3 for 1 CS split). Year 2: 60% of bonds convert 60% of Total Convertible CS (60%*24000) at 3 for 1 CS split at par $0.5= 21,600 Cash 5,000 Dividend Receivable - MJM 5,000 Receive MJM dividend 3 2/15/2014 4 2/15/2014 Cash 2,000 Bad Debt Expense 8,000 Account Receivable 2,000 Allowance for Doubtful Account 8,000 Receive MJM div (70% DRD for tax). Client billed $10k on 6/21/13 pays $2,000 and "skips down". Collec 2,000 Account receive and record 8,000 as bad debt 5 3/5/2014 Cash 100,000 Account Receivable 100,000 Collect all accounts receivable to date: 110,000 (AR @ end of year 2013) - 2,000 received - 8,000 uncollectable= 100,000 6 3/5/2014 Dividend Payable Income Tax Payable Cash 30,000 71,172 101,172 Pay off last year's divs and income tax (as estimated). 7 4/29/2014 Unearned Fees 55,500 Consultant Expense 11,100 Note Payable 17,920 Interest Expense -Building 8,960 Consulting Fees Cash Complete work for advance fees $185,000 received 6/21/13, 70% jobs had been done received 70% paymentpay by 12/31/2013, consultants(20%) pay bldg note interest (7% 8-yr note). For 4 months=8960 55,500 37,980 8 5/27/2014 Meal & Entertainment Expense 1,000 Cash 11,000 Treasuty Stock 12,000 Meal-Entertainment Expense 1,000. 50% nontax deductable 9/1/2013 bought 15,000 CS from sharholders at $3MV , TS=15,000. 10/1/2013 reissue 5,000 TS and retired 5,000 TS. TS = 15,000-reissue5,000-retired 5,000 = 5000 TS Reissue 80% * 5000TS * $3 each (which remains at $3 per share thru 12/31/14) =12000 Record the 36-month consulting contract for Unearned Fees2600000 no entry 9 6/6/2014 Cash 8,978 Violation Expense 500 Interest Revenue- PA Bond 7,603 Bond Interest Rec. 1,875 Interest revenue = 9478 (According to Amortization Schedule-Effective interest method 6/1/2014 Interest Rev.) Pay violation fee $ 500 to City of Philadelphia, which $500 is nontax deductable. Pension plan 2% of total Rev at 12/31/2014 10 7/2/2014 Interest Expense -Bond Discount on Bond Payable Cash 2,600 200 2,400 11 7/2/2014 Property Tax Expense Cash 10,000 12 7/2/2014 Supplies Expense Supplies 15,500 13 7/2/2014 Supplies 25,000 Account Payable 25,000 Pay rest of 40% semi-annual bond interest (4-yr, $200,000, 6% semi-annual bonds at 98 (use S-L), which 60% had converted to 60% 24,000 CS shares on 1/1/2014.) Pay Vehicle note payable intetest: note payable 81000 *8%*1/2 Pay to Philadelphia for real estate and BU&O taxes 10,000. Record supplies expense beg. Supplies (1year end supplies) 16500 - end supplies 1000 = supplies expense 15500 Buy $25,000 of supplies on credit. Supplies = Buy $25000 of supplies - decreased in supplies 15500 = 9500 14 8/30/2014 Note Payable - Vehicle 81,000 Interest Expense-Vehicle 4,320 Bank Penalty Expense 600 Cash 914,080 Unearned Fees 1,000,000 Pay off Note Payable for car loan 81000 Pay off 8% Interest Payable 81000*8%*1/2 = 3240 12/31/2013 Bought BMW (4-yr life, $30k Salvage, SYD Method), signing 8%, 6-month Note. Depreciation expense = price - salvage / useful life *1/2=7500 Pay off $600 bank penalty/ Receive $1,000,000 advance fees. by 12/31, 55% of work is completed (dr. Ueanrned Fees55%*1000000 and Cr. Consulting Fees55%*1000000)& consultants are paid (Consultant Fee 20% *55%*1000000 0f Consulting Fees). 15 9/28/2014 Prepaid Life Insurance 9,000 Prepaid Insurance-Building 29,700 Cash 38,700 Pay $9,000 for next 6-month Life Insurance. Pay for next 18 month building insurance at a 10% increase from the last rate. Using year1 insurance first 16 10/1/2014 Leased Equipment 700,000 Prepaid Taxes & Insurance -Leased Equipment 25,200 Capital Lease Liability 487,200 Cash 238,000 This is a capital lease because it is noncancelable & meets at least 1 of the 4 criteria, namely: #3 the 3-yr term is at least 75% of the 3-yr useful life Pay $238,000 to Lessor Co. as 1st annual payment on the signing of a 3-year, noncancelable computer lease to begin 11/1. Each annual payment includes $25,200 for tax and insurance, and Owl will pay maintanance cost for the equipment. Lessor Co. bought the computers for $700,000, See Note #13 for lease Amortization schedule 17 11/13/2014 Construction in Process 429,000 Account receivable 386,100 Cash 300,300 Account Payable 128,700 Billing on Construction in Process 386,100 Record Cost of Construction in Process and Record Process Billings Incur $429,000 of costs for 36-month Zip contract, paying 70% now, rest on credit, & progress bill Zip Co. for 90% of cost to date; at 12/31, estimated future costs are $1,771,000. 12/19/2014 Cash Interest Revenue-PA Bond Received PA Bond interest Revenue 18 19 12/19/2014 10,000 15,500 Pension Expense 9,478 9,478 1,452 Cash Pension Liability Funded 90% of estimated pension expense (2% of total revenue) Pension Worksheet requied on Note** 1,306 145 Ajusting Journal Entry 20 12/31/2014 Dividend receivable 3,200 Dividend Revenue Fair Value method: XYZ declared $20,000 dividend -PS*8% (it is cumulated dividend) *2 3,200 21 12/31/2014 Dividend Receivable-CS 8,000 Loss on Inverstment - MJM Co. 25,000 Retained Earnings MJM Co. Investment Large Stock Dividend (25%) use Par: MJM declared 20% stock dividend MJM reported NL of $100,000 8,000 25,000 22 12/31/2014 Violation Expense Cash 5,000 5,000 Pay off Violation Expense 5000 23 12/31/2014 24 12/31/2014 Bad Debt Expense 13,514 Supplies Expense 23,000 Allowance for Doubtfull Account Supplies Estimation 3.5% of AR is uncollectable and record $3,000 ending supplies Dividend-CS Dividend-PS 13,514 23,000 26,250 8,750 Dividend Payable Owl Co. declared $35,000 cash dividends 25 35,000 12/31/2014 26 Unearned Fees 550,000 Consultant Expenses 110,000 Consulting Fees Cash by 12/31, 55% of work is completed (dr. Ueanrned Fees55%*1000000 and Cr. Consulting Fees55%*1000000) & consultants are paid (Consultant Fee 20% *55%*1000000 0f Consulting Fees). 12/31/2014 Life Insurance Expense 4,500 Prepaid Life Insurance 550,000 110,000 4,500 Adjustment made for the pre-paid life insurance. 27 12/31/2014 28 12/31/2014 Insurance Expense-Building Prepaid Insurance-building 18,300 18,300 Adjustment made for the pre-paid building insurance 29 30 12/31/2014 12/31/2014 Interest Expense -Bond Interest Expense -Building Interest payable - Note Interest Payable - Bond Discount on Bond Payable Adjustment made for semiannual bond interest payables 2,600 17,920 17,920 2,400 200 Depreciation Expense 156,019 Accumulated Depreciation - Building Accumulated Depreciation - Equipment Accumulated Depreciation - Furniture Accumulated Depreciation - Vehicle Accumulated Depreciation - Leased Equipment Adjustment made for the Depreciation Expense Interest Expense-Leased Equipment 5,488 Interest Payable-Leased Equipment 20,400 35,000 18,286 24,000 58,333 5,488 Adjustment made for the interest expense on capital leased Equipment. 31 12/31/2014 Tax & Insurance Expense - Leased Equipment 6,300 Prepaid Taxes & Insurance -Leased Equipment 6,300 Adjustment made for the lease insurance expense on capital lease of equipment. 32 12/31/2014 Construction in Process 78,000 Construction Expenses 429,000 Revenue from Long-Term Contract 507,000 Adjustment to recognize revenue and profit 33 12/31/2014 Bond Interest Receivable Bond Interest Revenue Held-to-Maturity Securities 13,125 10,974 2,151 Adjustment for PA Bond Interest Revenue 34 12/31/2014 Unrealized Holding Loss-SE 7,000 Other Compreh. Gain Adjustment for the loss in value of PS interest in XYZ (106 BV vs. 99 MV) 35 12/31/2014 Officer Compensation Expense Paid-in-capital-Stock Options 7,000 Fair Value Adjustment-AFS 42,000 42,000 Adjustment for Compensation expenses on incurred 12 months 36 12/31/2014 21,423 Pension Expense Ask Professor about Pension Exp. AJE 21,423 Pension Liability Adjustment for Pension Expense up to the end of the year 37 12/31/2014 75,597 217,161 Income Tax Expense Deferred Tax Asset Income Tax Payable Adjustment for Income Tax Expense Dr.|Cr. Balance Check 292,758 4,967,806 - 4,967,806 Based on Total Revenue of the year Found 10 Cul. Yr 1 go to Other Compreh. Gain on BS Assets Liabilities SE Rev. Exp. Dividends Acct Cycle Step#2 Owl Co. General Ledger For the Year Ending 12/31/2014 Beg. 3 4 5 8 9 14 18 Cash 131,808 5,000 2,000 100,000 11,000 8,978 914,080 9,478 Account Payable 6,000 101,172 37,980 2,400 10,000 38,700 238,000 300,300 1,306 5,000 110,000 1 6 7 10 11 15 16 17 19 22 25 17 Beg. 20 21 Beg. 33 Account Receivable 110,000 386,100 394,100 2,000 100,000 4 5 1,875 3 9 6 AFS Secs. 106,000 106,000 Beg. 7 14 Allowance for Doubtful Account 10,000 Beg. 8,000 4 13,514 23 31,514 17 32 Construction in Process 429,000 78,000 507,000 Beg. 13 Beg. 15 15 2 15,500 23,000 18,300 35 Notes Payable 17,920 465,000 Beg. 81,000 366,080 12 23 12 23 27 Bond Payable 120,000 200,000 Beg. 80,000 Supplies Expense 15,500 23,000 38,500 Insurance Expense-Building 18,300 26 1 2 10 28 Life Insurance Expense 4,500 29 Depreciation Expense 156,019 4 23 16 Pension Liability Bad Debt Expense 8,000 13,514 21,514 8 Meal-Entertainment Expense 1,000 14 19 36 27 Bank Penalty Expense 600 175,000 Beg. 9 22 Paid-in-Capital-PS 4,500 26 Held to Maturity Secs. 270,496 268,345 2,151 Violation Expense 500 5,000 5,500 19 36 Pension Expense 1,452 21,423 22,875 2,933 Beg. 33 MJM Co. Investment 192,500 167,500 25,000 122,750 Beg. 28,080 150,830 Paid-in-Capital-CS 362,067 Beg. 89,820 451,887 21 2 30 1 10 28 2,500 Beg. Paid-in-Cap-Stk Options 7,000 Beg. 42,000 35 49,000 Building 408,000 Equipment 120,000 Interest Expense-Leased Equipment 5,488 2 Paid-in-Capital-TS Land 72,000 Beg. Officer Compensation Expense 42,000 Preferred Stk Prepaid Life Insurance 9,000 4,500 Beg. Consultant Expense 11,100 110,000 121,100 Tax & Insurance Expense - Leased Equipment 31 6,300 Common Stk Beg. 32 30 Income Tax Payable 71,172 Beg. 71,172 292,758 37 292,758 31 Beg. 33 Revenue from Long-Term Contract 507,000 28 17 Prepaid Taxes & Insurance -Leased Equipment 16 25,200 6,300 18,900 Beg. 20 Bond Interest Revenue 7 25 145 21,423 21,569 Prepaid Insurance 15,000 29,700 26,400 3,200 Dividend Payable 30,000 30,000 Beg. 26,250 24 26,250 Capital Lease Liability 487,200 Supplies 16,500 25,000 3,000 9 18 Dividend Revenue Discount on Bond Payable 3,500 500 2,100 200 200 500 Beg. Billing on Construction in Process 386,100 7,603 9,478 17,080 Interest Revenue Interest Payable - Bond 2,400 6 Bond Interest Rec. 1,875 13,125 13,125 7 25 Unearned Fees 55,500 55,500 Beg, 550,000 1,000,000 14 450,000 Interest Payable-Leased Equipment 5,488 5,000 55,500 550,000 605,500 10,974 Dividend Receivable 5,000 3,200 8,000 11,200 13 17 Interest payable - Note 23,920 Beg. 17,920 28 41,840 7 25 331,486 Beg. Consulting Fees 25,000 128,700 153,700 Interest Expense-Bond 6,500 2,600 2,600 11,700 7 28 Interest Expense -Building 8,960 17,920 26,880 Retained Earnings 16 29,238 Beg. 8,000 21 37,238 Treasury Stock 15,000 12,000 3,000 Beg. Vehicles 90,000 Beg. Interest Expense-Vehicle 4,320 21 Loss on Inverstment - MJM Co. 25,000 32 Leased Equipment 700,000 14 Construction Expenses 429,000 11 Property Tax Expense 10,000 37 Income Tax Expense 75,597 8 Other Compreh. Gain Furniture 84,000 Beg. 1,000 Beg. 7,000 34 8,000 Accumulated Depreciation 83,600 Beg. 20,400 29 35,000 29 18,286 29 24,000 29 58,333 29 239,619 37 Deffered Tax Asset 217,161 34 Unrealized Holding Loss-SE 7,000 24 Dividend-CS 26,250 Dividend-PS 24 Dr. 4,605,660 Cr. 4,605,660 8,750 Acct Cycle Step#3 Owl Co. Adjusting Trial Balance For the Year Ending 12/31/2014 Dr Asset Liability SE REV EXP. Cash Account Receivable Dividend Receivable Bond Interest Rec. AFS Secs. Allowance for Doubtful Account Construction in Process Billing on Construction in Process Supplies Prepaid Insurance Prepaid Life Insurance Prepaid Taxes & Insurance -Leased Equipment Held to Maturity Secs. MJM Co. Investment Land Building Equipment Leased Equipment Vehicles Furniture Accumulated Depreciation Deffered Tax Asset Account Payable Unearned Fees Interest payable - Note Interest Payable - Bond Interest Payable-Leased Equipment Dividend Payable Income Tax Payable Notes Payable Bond Payable Discount on Bond Payable Capital Lease Liability Pension Liability Preferred Stk Paid-in-Capital-PS Common Stk Paid-in-Capital-CS Paid-in-Capital-TS Paid-in-Cap-Stk Options Retained Earnings Treasury Stock Other Compreh. Gain Unrealized Holding Loss-SE Consulting Fees Interest Revenue Dividend Revenue Bond Interest Revenue Revenue from Long-Term Contract Consultant Expense Officer Compensation Expense Supplies Expense Insurance Expense-Building Tax & Insurance Expense - Leased Equipment Life Insurance Expense Depreciation Expense Bad Debt Expense Meal-Entertainment Expense Bank Penalty Expense Violation Expense Pension Expense Interest Expense-Leased Equipment Interest Expense-Bond Interest Expense -Building Interest Expense-Vehicle Loss on Inverstment - MJM Co. Construction Expenses Property Tax Expense Dividend-CS Dividend-PS Income Tax Expense Cr 331,486 394,100 11,200 13,125 106,000 31,514 507,000 386,100 3,000 26,400 4,500 18,900 268,345 167,500 72,000 408,000 120,000 700,000 90,000 84,000 239,619 217,161 153,700 450,000 41,840 2,400 5,488 26,250 292,758 366,080 80,000 500 487,200 21,569 175,000 2,933 150,830 451,887 2,500 49,000 37,238 3,000 8,000 7,000 605,500 17,080 3,200 10,974 507,000 121,100 42,000 38,500 18,300 6,300 4,500 156,019 21,514 1,000 600 5,500 22,875 5,488 11,700 26,880 4,320 25,000 429,000 10,000 26,250 8,750 75,597 4,614,410 *Note: No Net Income before-tax and No Net Income on ATB 4,605,660 Acct Cycle Step#4 Income Tax AJE Worksheet - A general Guideline for Last Project AJE Book Income (before income taxes) + Permanent Differences: Gov. Fines & Penalties 50% Meals & Entertainment Municipal Bond Interest Life Insurance Premiums Divs Rec'd Deduction Others? Book Income adjusted for US Perm.Diffs + Temporary Differences: Bad Debt Stock Option Compensation Equity Method vs Div Rev Unearned Rev-taxed in Yr 1 Unearned Rev-taxed in Yr 2 Unfunded Pension Exp Book Depreciation vs MACRS Others? 166,909 = Total Rev Spring 2014 1,143,755 less Total pre-tax Expenses 976,846 on ATB: exp exp Rev: Based on JE bc no deduction for 100% of amount 500 500 (10,974) 9,000 (3,500) ? 162,435 13,514 42,000 17,000 (55,500) 450,000 145.16 (547) Taxable Income for State & Local Tax Pay. Less State & Local Incomes Taxes US Taxable Income (per Form 1120) US Inc. Tax per Corp.Tax Rate Schedule Plus State & Local Incomes Taxes Income Tax Payable 629,046 (119,519) 509,527 173,239 119,519 292,758 Book Income adjusted for Perm. Diffs Less State & Local Incomes Taxes Adj'd BI for US Inc Tax Expense US Inc. Tax Exp (per Corp.Tax Rate Sch): Plus State & Local Taxes Income Tax Expense 162,435 (30,863) 131,572 44,735 30,863 75,597 [ [ 21,514 BI BDE vs. 8,000 Tax Direct Writeoff ] Non-Qualified SO's: No ded to Co. til excercised & taxed to employees on W-2. 25,000 Equity Method Loss vs 8,000 Taxable Dividend Revenue] BI in Yr 2, but TI in Yr 1 (IRC exception to tax accrual basis: collect tax when $ rec'd). BI in Yr 3, but TI in Yr 2 (IRC exception to tax accrual basis: collect tax when $ rec'd). 97,686 BI Depr. (except Cap.Lease) vs. 98,233 MACRS (below) 2013 2013 2013 Year 2 MACRS Calculations: Equipment DDB 120,000 BV/5 UL*2*1/2 Year = Furniture DDB 84,000 BV/7 UL*2*1/2 Year = Vehicles DDB 90,000 BV/5 UL*2*1/2 Year = 2014 2014 2014 2014 Equipment Furniture Vehicles Building DDB DDB DDB SL 1 55500 550,000 (120,000 - 24000)BV/5 UL*2 = (84,000 - 12,000)BV/7 UL*2 = (90,000-18,000)BV/5 UL*2 = 408,000 DC/ 39 UL = TOTAL Year 2 MACRS DEDUCTION Marginal Tax Rate: 34% US % + 10% State + 9% Local = 24,000 Computer 12,000 (BV=HC-AD)/UL*2 18,000 (BV=HC-AD)/UL*2 38,400 20,571 28,800 10,462 DC=HC-SV 98,233 53% 2 0 1,000,000 3 55500 NI -450,000 NI reverse reverse Acct Cycle Step#5 Owl Co Statement of Stockholders' Equity For the year ending 12/31/14 CS # of shares Balance at 1/1/13 Bond Conversion to CS AFS-unrlz'd Gain(loss) Stock Options Net Income Cash Div - CS/PS Balance at 1/1/14 Bond Conversion to CS AFS-unrlz'd Gain(loss) Stock Options Net Income Cash Div - CS/PS Balance at 1/1/15 CS Par Value At 1/1/13 Issue CS Issue PS 3/1 Split Buy TS Issue TS Retire 5,000 shs TS Stk Options AFS-unrlz'd gain AFS-unrlz'd loss Net Income Cash Div-PS Cash Div-CS CS Div CS 12/31: PS 12/31: TS 12/31: PS # of shares PS PS Par Value APIC TS o/s # shs - PS & CS o/s # shs At 1/1/12 Issue CS Issue PS 3/1 Split Buy TS Issue TS Retire 5,000 shs TS Stk Options AFS-unrlz'd gain AFS-unrlz'd loss Net Income Cash Div-PS Cash Div-CS CS Div CS 12/31: PS 12/31: TS 12/31: CS APIC 65,000 1,750 130,000 (15,000) 5,000 - Statement of Stockholders' Equity For the Year Ending 12/31/13 PS & CS Treasury RE & ParValue APIC Stock Compreh. (CS PV=$1.50; PS PV=$100) 97,500 374,567 CS $0 175,000 2,933 PS (CS PV $ .50) $0 (45,000) 2,500 15,000 $0 (2,500) (12,500) 15,000 7,000 $0 Compreh. 1,000 55,500 1,750 5,000 43,200 5,000 - 27,750 122,750 175,000 SO's (CS PV $.50; PS PV=$100) 21,600 2,500 PIC-TS 364,567 (15,000) 2,933 Compreh.I. 7,000 - $86,988 (8,750) ($21,250) (27,750) $29,238 1,000 $0 $89,820 CS Totals 472,067 177,933 (45,000) 17,500 7,000 1,000 86,988 (8,750) (21,250) 687,488 - 111,420 5,000 5000 42,000 Compreh. 8,000 7,000 91,312 (26,250) (8,750) 42,000 8,000 (7,000) 91,312 (26,250) (8,750) Treasury APIC Stock Stock Opt. Retained Earnings Compreh. Income Totals Acct Cycle Step#5 Owl Co Income Statement For the Year Ending Revenue: Expense: 12/31/2014 12/31/2013 605,500 17,080 3,200 10,974 507,000 42,000 121,100 38,500 18,300 6,300 4,500 156,019 21,514 1,000 600 5,500 22,875 5,488 11,700 26,880 4,320 25,000 429,000 10,000 26,250 166,909 (75,597) 91,312 91,312 374,500 37,500 1,580 7,000 74,900 13,500 12,000 83,600 10,000 24,420 188,160 (84,672) 103,488 (16,500) 86,988 Consulting Fees MJM Co.Revenue Interest Revenue Dividend Revenue Bond Interest Revenue Revenue from Long-Term Contract Officer Compensation Expense Consultant Expense Supplies Expense Insurance Expense-Building Tax & Insurance Expense - Leased Equipment Life Insurance Expense Depreciation Expense Bad Debt Expense Meal-Entertainment Expense Bank Penalty Expense Violation Expense Pension Expense Interest Expense-Leased Equipment Interest Expense-Bond Interest Expense -Building Interest Expense-Vehicle Loss on Inverstment - MJM Co. Construction Expenses Property Tax Expense Dividend-CS Operating Income before Taxes Income Tax Expense Income-Continuing Operations Extraord. Loss (net of tax) Net Income Earnings per share: From Operations Extraordinary Loss Basic EPS Diluted Basic Diluted $0.38 $(0.07) $0.31 $0.28 $(0.04) $0.24 Acct Cycle Step#6 Owl Co Balance Sheet For the Year Ending Stockholders' Equity Preferred Stk Paid-in-Capital-PS Common Stk Paid-in-Capital-CS Paid-in-Capital-TS Paid-in-Cap-Stk Options Retained Earnings Treasury Stock Other Compreh. Gain Unrealized Holding Loss-SE Total SE 12/31/2014 12/31/2013 175,000 2,933 150,830 451,887 2,500 49,000 40,226 (3,000) 8,000 (7,000) 175,000 2,933 122,750 362,067 2,500 7,000 29,238 (15,000) 1,000 - 870,376 687,488 Acct Cycle Step#7 Owl Co Statemet of Comprehensive Income For the Year Ending Net Income Other Comprehensive Gain Eding Comprehensive Income 12/31/2014 12/31/2013 91,312 8,000 99,312 86,988 1,000 87,988 Owl Co Statement of Cash Flows Operating Activities-Direct Method Advance Fees Accts Receivable Collected Consultant Fees Building Insurance Office Supplies Net Operating Investing Activities Building Down Payment Equipment Payment Furniture Payment Vehicle Down Payment Purchase ABC Co. Bonds Purchase XYZ Co. Pfd Stock Purchase ABC Co. Bonds Net Investing Financing Activities Common & Pfd Stock Issued Bond Issued Issue & sell Treasury Stock Net Financing Net Change in Cash Beginning Cash Ending Cash 16 Prepare Owl's Lease Amortization Schedule for this Lease (Q 10) & Record Pi's JE's at 1/1/14 2nd payment & 12/31/14 2nd year-end accruals for Lease (Q 10): Date Annual L. Pmt Executory Interest Pmts Reduction of LL 10/1/2013 (per lease contract) (per lease) (8% PVR * LL) (Pmt-Exec.-Int) 10/1/2013 238,000 25,200 $0.00 212,800 10/1/2014 238,000 25,200 $21,952.00 190,848 10/1/2015 238,000 25,200 $6,684.16 206,116 10/1/2016 238,000 25,200 ($9,805.11) (122,564) 952,000 100,800 $18,831.05 487,200 LeaseLiability 487,200 274,400 83,552 (122,564) `0 Cost-to-Cost Completion % 2014 Contract Price Less estimated costs: Cost to date Estimated cost to complete Estimated total cost Estimated total GP % Complete : 2600000 429,000 1,771,000 (2,200,000) (2,200,000) 429,000/2,200,000 = 19.5% IS: EPS Income-Continuing Operations Less Preferred Stock dividends Income from operations available to common shares Basic: Net Income available to common shareholders convertible bonds (Interest Exp.net of ) preferred stock Diluted: NI available to common + assumed converted shares Notes: Income $91,312 (3,200) a) 88,112 $88,112 c) a) Shares Per Share 254,900 b) d) e) a) b) c) d) e) 5. Depreciation expense on Income Statement is determined using Straight Line & Double Declining Balance Methods. The details and breakdown of depreciable assets are as follows: Type Historical Cost Building Useful life Computers Furniture Vehicles #REF! Accumulated $ #REF! 20 years #REF! 4 years #REF! 7 years 4 years #REF! Initial Date #REF! #REF! #REF! 0 Methods 5/1/2013 Straight-Line 3/1/2013 Double-Declining Balance Balance 12/31/2013 Sum-of-Years-Digits 3/1/2013 Double-Declining #REF! 6. The details and Bond & Note Payable Loans are as follows: Term Amount Type & Valuation 4 year $- 8 year #REF! #REF! Bond Amortized Discount Cost Building Note Principal 2013 Interest Exp. & Rate #REF! 6% (Straight-Line amortization) #REF! #REF! 7% $0.35 $0.35
