Comprehensive income items Marketable securities on the balance sheet at a cost of $5,500,000 are available-for-sale

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Question:

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).

Stockholder Equity

Peyton Approved prides itself on transparency with shareholders and investors. The company has added two storefront locations and launched a new marketing campaign, which is estimated to bring in 20,000 new customers over the next 6 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 options are:

1) Issuing an additional $1,000,000 of 10%, 100-par convertible preferred stock (same class as is currently outstanding)

2) Issue an additional $1,000,000 of 8% convertible bonds (same terms as the existing issue)

3) $500,000 each of preferred stock and bonds

		PEYTON APPROVED
		TRIAL BALANCE
		As of December 31, 2017			Adjusting entries
	Dr		Cr		Dr	Cr	Dr	Cr
Cash	1,488,999.34						1,488,999.34
Marketable Securities	5,500,000.00						5,500,000.00
Accounts Receivable	7,092,495.88						7,092,495.88
Baking Supplies	1,605,098.52						1,605,098.52
Merchandise Inventory	128,152.63						128,152.63
Prepaid Rent	71,877.07						71,877.07
Prepaid Insurance	207,834.14						207,834.14
Misc. Supplies	17,647.42						17,647.42
Land	250,000.00						250,000.00
Building	1,250,000.00						1,250,000.00
Baking Equipment	2,254,140.00						2,254,140.00

Accumulated Depreciation			328,282.00					328,282.00
Patent							-
Accounts Payable			1,555,212.85					1,555,212.85
Wages Payable			250,203.31					250,203.31
Interest Payable			21,888.22					21,888.22
Current Portion of Bonds Payable			1,000,000.00					1,000,000.00
Income Taxes Currently Payable			1,042,118.16					1,042,118.16
Accrued Pension Liability								-
Accrued Employees Health Insurance								-
Lease Liability								-
								-
Deferred Tax Liability								-
Bonds Payable			4,000,000.00					4,000,000.00
Preferred Stock			500,000.00					500,000.00
Common Stock			1,750,000.00					1,750,000.00
Beginning Retained earnings			2,213,122.59					2,213,122.59
Dividends - Preferred	50,000.00						50,000.00
Dividends - Common	5,250,000.00						5,250,000.00
Bakery Sales			33,881,157.15					33,881,157.15
Merchandise Sales			124,795.80					124,795.80
Cost of Goods Sold - Baked	10,954,907.36						10,954,907.36
Cost of Goods Sold - Merchandise	88,994.79						88,994.79
Rent Expense	1,576,731.95						1,576,731.95
Wages Expense	2,604,526.23						2,604,526.23
Misc. Supplies Expense	263,224.56						263,224.56
Repairs and Maintenance	47,353.05						47,353.05
Business License Expense	211,757.65						211,757.65
Misc. Expense	141,171.08						141,171.08
Depreciation Expense	634,520.00						634,520.00
Insurance Expense	112,937.69						112,937.69
Advertising Expense	160,413.49						160,413.49
Interest Expense	484,703.27						484,703.27
Telephone Expense	50,821.34						50,821.34
Pension Expense							-
Retired Employees Health Ins.							-
Patent Amortization							-
							-
Unrealized Gain/(Loss) on Marketable Securities Held for Sale							-
							-
Income Taxes	4,168,472.62						4,168,472.62
Deferred tax Expense							-

	46,666,780.08		46,666,780.08		-	-	46,666,780.08	46,666,780.08

				(1)				milestone 1
				(2)				milestone 1

				(3)				milestone 1

				(4)				milestone 2
				(5)				milestone 2
				(6)
								milestone 2



				(7)				final
				(8)				final