VPI, Inc. is a manufacturer of high-end boutique clothing. The company purchases pre-sewn clothing and employees a team of artists who add decorative stitching, beading, and other accents. The business has been in the Virgil family for over 50 years. It was originally founded by James Virgil, but is now run by his three grandchildren, Virginia, Paul, and Irene. The business had been a closely held private corporation, but wanting to expand the business, the grandchildren took the company public in late 2020. Prior to going public the company had prepared cash basis financial statements, but were required to start preparing GAAP basis financial statements starting as of January 1, 2021. The accounting staff are now working on preparing the annual 2021 financial statements. VPI, Inc. hired a new controller, Maggie Miller, late in the year of 2021 to help with the transition to GAAP based statements and to help in dealing with the more complicated transactions that the company has engaged in as part of the business expansion plans. Maggie has reviewed the 2021 financial statements and has noted the following potential issues. VPI, Inc is subject to a 21% federal income tax rate.