Ms. Coughlan has developed plans to expand into the wholesale flower market and is in the process of negotiating a bank loan with Bridgewater Savings Bank to finance the expansion. The bank is requesting financial statements prepared on the accrual basis of accounting for 2016 from the company. During the course of his review engagement, Heather McDonald, CPA, obtained the following information:

Coughlan’s Flowers
Unadjusted trial Balance
December 31, 2016
			Dr.	Cr.
Cash			$125,600
Investments Accounts receivable, 12/31/15			300,000 116,200
Allowance for doubtful accounts, 12/31/15				$20,000
Inventory, 12/31/15			62,000
Furniture and Fixtures			118,200
Accumulated depreciation, Furniture & Fixtures 12/31/15				32,400
Accounts payable, 12/31/15				42,000
Capital stock, $10 par value				50,000
Retained earnings, 12/31/15				242,000
Sales				1,549,100
Notes payable 4%, due 3/31/17				200,000
Purchases			906,600
Fencing expense			80,000
Salaries expense			262,000
Income tax expense			45,000
Interest expense				6,000
Insurance expense			34,100
Rent expense			34,200
Utilities expense			12,600
Freight in			15,000
Freight out			17,000
Travel expense			13,000
TOTALS			$2,141,500	$2,141,500

1. Amounts due from customers totaled $175,000 at 12/31/2016.

2. In analyzing amounts due from customers at 12/31/2016, Simmons discovers that Coughlan’s has a $6,000 receivable more than 9 months overdue from Jim’s Retail Store. Simmons discovers that Jim’s filed for bankruptcy on 12/02/2016 and determines that it is highly unlikely that Coughlan’s will recover any of the $6,000 and that the amount should be written off.

3. A further analysis and aging of accounts receivable at 12/31/2016 shows approximately $18,000 of potential uncollectible accounts other than the Jim’s Retail Store account.

4. Unpaid invoices for flower purchases totaled $42,000 at 12/31/2015 and $54,000 at 12/31/2016.

5. Based on a physical count, the inventory at 12/31/2016 was valued at $52,000.

6. On May 1, 2016, Coughlan’s paid $26,100 to renew its comprehensive insurance coverage for one year. The premium on the previous one year policy, which expired on April 30, 2016, was $24,000. The company made the appropriate adjusted entry on 12/31/2015, which was subsequently reversed on 1/2/2016.

7. Coughlan’s installed new fencing around the perimeter of the property. The installation was completed on 6/28/2016 at a cost of $80,000. Coughlan estimates the useful life of the fencing to be 20 years. Coughlan uses straight-line depreciation.

8. In reviewing the cash receipts journal, Simmons discovers that a piece of furniture purchased on 6/30/2011 for $25,000 being depreciated using the straight-line method with an estimated salvage value of $5,000 and a useful life of 5 years, was sold on March 31, 2016 for $6,000 cash. Unfamiliar with the proper accounting, the bookkeeper debited cash and credit sales for the receipt of the $6,000.

9. The note payable was taken out on 4/1/2015. A proper accrual was made at 12/31/15 and the entry was reversed at 1/2/2016. All principal and interest are due at maturity.

10. On November 15, 2016, one of Coughlan’s delivery drivers was in an accident with another vehicle. Unfortunately, the driver had a few beers at lunch and was cited for impaired driving. The company is being sued for $200,000. Fortunately, the comprehensive insurance policy will cover all but the first $40,000. The first court date has been scheduled for Feb. 15, 2017. Coughlan’s attorney advises her to settle at the time. The estimated settlement will be between $125,000 and $175,000.

11. All employees are paid weekly on Friday. The average payroll is $5,000 weekly for a 6 day work week. Employees were last paid on 12/31/2016 for the week ended 12/24/2014. Because Coughlan is Canadian, her policy is to give all employees paid holidays for Christmas Day and the following day, which is known as Boxing Day in Canada. This will be reflected in the paychecks distributed on 1/6/2017.

12. Coughlan’s has made estimated tax payments of $15,000 per quarter for the first three quarters of 2016. Coughlan’s tax rate is 35% of pretax income.

The investments account is comprised of two investments. One $200,000 bond was purchased at face value and Coughlan intends to hold until it matures. The interest on these bonds is 3% and is paid annually on January 31. Coughlan purchased these bonds on September 1^st of the current year. The fair values of these bonds are $96,000. The other investments are shares of Google stock, which were purchased years ago when Google was selling at $100/share. Assume the closing price of Google on 12/31/16, was $814/share.