Overview Imagine that you are working as a financial accountant for Peyton Approved, and you have been charged with revising its financial information The company has experienced tremendous growth in the past three years, and it is now a well known bakery chain for pet products They have become a publicly traded company and have several locations that they deliver to regionally You will find the company's financial information in the Peyton Approved Balance Sheet and Income Statement This document will need revisions and appropriate notes added in order to prepare for the year end audit accordingly In addition to ensuring that the balance sheet is ready for the year end audit, you will address other major areas of need, including Assessing tax implications Evaluating and explaining stockholder equity Accounting for postretirement benefits (The amounts would be determined by actuaries ) Assessing impacts of leases Peyton Approved Financial Information 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) Potentially Dilutive Securities Peyton has the following potential dilutive securities $4,000,000 in bonds payable 10 , 20 year Every $1,000 bond can convert to 5 shares of common stock Preferred stockEvery share issued can convert to 1 share of common stock Expansion Plans The company is adding two storefront locations and launching a new marketing campaign, which is estimated to bring in 20,000 new customers over the next six 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 financing options are 1 Issuing an additional $1,000,000 of 10 , 100 par convertible preferred stock (same class as is currently outstanding) 2 Issuing an additional $1,000,000 of 8 convertible bonds (same terms as the existing issue) 3 Issuing $500,000 each of preferred stock and bonds Postretirement Benefits Peyton Approved has revised its postretirement plan It will now provide health insurance to retired employees Management has requested that you report the short and long term financial implications of this The company is currently employing 60, and actuaries estimate that the company has a pension liability of $107,041 70 The estimated cost of retired employees' health insurance is $43,718 91 Prepare adjusting entries for the pension liability and the health insurance liability Leases Six ovens were rented on December 31, with $20,000 charged to rent expense The lease runs for 6 years with an implicit interest rate of 5 At the end of the 6 years, Peyton will own them Make any necessary adjusting entries Other Items On December 31, 20XX, the company repaired a packaging machine at cost of $27,000 00 It is expected that the repair will extend the life of the machine by four years No depreciation is necessary this year The initial entry recorded the repair to the repair and maintenance account The company spent $50,000 to obtain and defend a patent for its formula for dog treats The patent took effect on 1 1 20XX and provides 20 years of protection The $50,000 amount was incorrectly charged to Misc Expense Make any necessary adjusting entries Need help checking answers and filling out the empty green cells B D E F G H j K M M N 0 HUIVIE TRIAL BALANCE As of December 31, 2017 , Adusting entries Dr Dr Cr Cr 265,000 00 1,488 999 34 5 500 000,00 7,092 495 88 1 605 098 52 128,152 63 71 877 07 207 834 14 17,647 42 250,000 00 1 280 000 C 2254 140 00 Dr 1,488,600 34 5 235 000,00 7,092,496 88 1,605,086 52 128,152 63 71,877 07 207,834 14 17,647 42 250,000 00 1,250,000 00 2,281,140,00 Cash Marketable Securities Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Mise Supplies Land Building Baking Equipment Equipment Repair Accumulated Depreciation Patent Accounts Payable Wages Payable Interest Payable Current Portion of Bonds Payable Income Taxes Currently Payable Accrued Pension Liability Accrued Employees Health Insurance Lease Liability 2700000 328 282 00 328,282 00 50,000 00 2,500 00 47,500 00 1,555 212 85 250 203 31 21 888 22 1 000 000 00 1 042,118 16 1,555,212 85 250,203 31 21,888 22 1,000,000 00 1,042,493 16 107,041 70 43,718 91 375 00 107,041 70 43,71891 4,000,000 00 500,000 00 1,750,000 00 2213 122 59 4,000,000 00 500,000 00 1,750,000 00 2,213, 122 50 50,000 00 6 250 000,00 50,000 00 5,250,000 00 33 891, 157 15 124,795 90 33,881,157 15 124,796 80 20,000 00 Deferred Tax Liability Bonds Payable Preferred Stock Common Stock Beginning Retained earnings Dividends Preferred Dividends Common Bakery Sales Merchandise Sales Cost of Goods Sold Baked Cost of Goods Sold Merchandise Rent Expense Wages Expense Misc Supplies Expense Repairs and Maintenance Business License Expense Misc Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Pension Expense Retired Employees Health Ins Patent Amortization 27,000 00 10954 907 36 88 904 79 1,576 731 95 2604,526 23 263 221 56 47 353 05 211,757 65 141,171 08 634 520 00 112 937 69 160 413 49 484,703 27 50 82134 50,000 00 10,954,90736 88,964 79 1,556, 731 96 2,604,526 23 263,221 56 20,353 06 211,757 66 91,171 08 634,520 00 112,937 69 160,413 49 484, 70X3 27 50,82134 107,041 70 43,71991 2,500 00 107 041 70 43,719 91 2,500 00 Unrealized Gain Loss) on Marketable Securities Held for Sale 265,000 00 265,000 00 Income Taxes Deferred tax Expense 4 168 472 82 4,168,47262 46 780 04 , 46 686 790 04 496 261 61 515,635 61 46,797,541 68 46,817,915 19 41 TA PRAIA A Marie Curie

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Overview: Imagine that you are working as a financial accountant for Peyton Approved, and you have been charged with revising its financial information. The company

Overview: Imagine that you are working as a financial accountant for Peyton Approved, and you have been charged with revising its financial information. The company has experienced tremendous growth in the past three years, and it is now a well-known bakery chain for pet products. They have become a publicly traded company and have several locations that they deliver to regionally.

You will find the company's financial information in the Peyton Approved Balance Sheet and Income Statement. This document will need revisions and appropriate notes added in order to prepare for the year-end audit accordingly. In addition to ensuring that the balance sheet is ready for the year-end audit, you will address other major areas of need, including:

Assessing tax implications
Evaluating and explaining stockholder equity
Accounting for postretirement benefits (The amounts would be determined by actuaries.)
Assessing impacts of leases

Peyton Approved Financial Information

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).

Potentially Dilutive Securities

Peyton has the following potential dilutive securities:

$4,000,000 in bonds payable 10%, 20 year. Every $1,000 bond can convert to 5 shares of common stock. Preferred stockEvery share issued can convert to 1 share of common stock.

Expansion Plans

The company is adding two storefront locations and launching a new marketing campaign, which is estimated to bring in 20,000 new customers over the next six 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 financing options are: 1. Issuing an additional $1,000,000 of 10%, 100-par convertible preferred stock (same class as is currently outstanding) 2. Issuing an additional $1,000,000 of 8% convertible bonds (same terms as the existing issue) 3. Issuing $500,000 each of preferred stock and bonds

Postretirement Benefits

Peyton Approved has revised its postretirement plan. It will now provide health insurance to retired employees. Management has requested that you report the short- and long-term financial implications of this.
The company is currently employing 60, and actuaries estimate that the company has a pension liability of $107,041.70.
The estimated cost of retired employees' health insurance is $43,718.91.
Prepare adjusting entries for the pension liability and the health insurance liability.

Leases

Six ovens were rented on December 31, with $20,000 charged to rent expense. The lease runs for 6 years with an implicit interest rate of 5%. At the end of the 6 years, Peyton will own them. Make any necessary adjusting entries.

Other Items

On December 31, 20XX, the company repaired a packaging machine at cost of $27,000.00. It is expected that the repair will extend the life of the machine by four years. No depreciation is necessary this year. The initial entry recorded the repair to the repair and maintenance account.
The company spent $50,000 to obtain and defend a patent for its formula for dog treats. The patent took effect on 1/1/20XX and provides 20 years of protection. The $50,000 amount was incorrectly charged to Misc. Expense

Make any necessary adjusting entries.

Need help checking answers and filling out the empty green cells.

image text in transcribed

B D E F G H j K M M N 0 HUIVIE TRIAL BALANCE As of December 31, 2017 , Adusting entries Dr Dr Cr Cr 265,000.00 1,488.999.34 5.500.000,00 7,092.495.88 1.605.098.52 128,152.63 71.877.07 207 834.14 17,647.42 250,000.00 1.280.000 C 2254 140.00 Dr 1,488,600.34 5.235.000,00 7,092,496.88 1,605,086.52 128,152.63 71,877.07 207,834.14 17,647.42 250,000.00 1,250,000.00 2,281,140,00 Cash Marketable Securities Accounts Receivable Baking Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Mise Supplies Land Building Baking Equipment Equipment Repair Accumulated Depreciation Patent Accounts Payable Wages Payable Interest Payable Current Portion of Bonds Payable Income Taxes Currently Payable Accrued Pension Liability Accrued Employees Health Insurance Lease Liability 2700000 328.282.00 328,282.00 50,000.00 2,500.00 47,500.00 1,555.212.85 250 203.31 21.888.22 1.000.000.00 1.042,118.16 1,555,212.85 250,203.31 21,888.22 1,000,000.00 1,042,493.16 107,041.70 43,718.91 375.00 107,041.70 43,71891 4,000,000.00 500,000.00 1,750,000.00 2213.122.59 4,000,000.00 500,000.00 1,750,000.00 2,213, 122.50 50,000.00 6.250.000,00 50,000.00 5,250,000.00 33.891, 157.15 124,795.90 33,881,157.15 124,796.80 20,000.00 Deferred Tax Liability Bonds Payable Preferred Stock Common Stock Beginning Retained earnings Dividends - Preferred Dividends - Common Bakery Sales Merchandise Sales Cost of Goods Sold-Baked Cost of Goods Sold- Merchandise Rent Expense Wages Expense Misc. Supplies Expense Repairs and Maintenance Business License Expense Misc. Expense Depreciation Expense Insurance Expense Advertising Expense Interest Expense Telephone Expense Pension Expense Retired Employees Health Ins. Patent Amortization 27,000.00 10954.907.36 88.904.79 1,576.731.95 2604,526.23 263.221.56 47.353.05 211,757.65 141,171.08 634.520.00 112.937.69 160 413.49 484,703 27 50.82134 50,000.00 10,954,90736 88,964.79 1,556, 731.96 2,604,526.23 263,221.56 20,353.06 211,757.66 91,171.08 634,520.00 112,937.69 160,413 49 484, 70X3.27 50,82134 107,041.70 43,71991 2,500.00 107 041 70 43,719.91 2,500.00 Unrealized Gain/Loss) on Marketable Securities Held for Sale 265,000.00 265,000.00 Income Taxes Deferred tax Expense 4.168.472.82 4,168,47262 46. 780.04 , 46.686.790.04 496 261.61 515,635.61 46,797,541.68 46,817,915 19 41 TA PRAIA A Marie Curie