Only the workbook part is to be completed.I. Workbook A. Prepare adjusting entries for unrealized loss and tax issues
ACC 309 Milestone One Guidelines and Rubric Overview: For Milestone One, which is due in Module Three, you will develop a portion of the workbook and a brief memo to management explaining the impacts to stockholder equity and the impact of tax structures. You will build on this milestone in subsequent modules to create the balance sheet and executive summary portions of your final project. Prompt: First, review the Final Project Scenario document. Using your review of the scenario, begin your balance sheet and discuss the impacts in your management brief, including impacts on stockholder equity and impacts based on changes to tax structure. Note: Milestone One is a draft of some of the critical elements of the final project. Specifically, the following critical elements must be addressed: I. Workbook A. Prepare adjusting entries for unrealized loss and tax issues. II. Management Brief A. Identify sources of other comprehensive income not included in net income. B. Explain rationale for the inclusion as comprehensive income (as opposed to net income) of nondisclosure within notes. C. Evaluate impacts of company goals and finances for their implications on stockholder equity, using financial information to support claims. D. Evaluate impacts of company goals and finances for their implications on retained earnings per share, using financial information to support claims. E. Explain the impact of issuing preferred stock or debt for determining changes to equity structures. F. Assess the impact of changes to current tax structure for articulating changes relevant to the company. Rubric Guidelines for Submission: Your balance sheet must be submitted as a Microsoft Excel document, and your management brief should be a 1-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins. Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Workbook: Adjusting Entries Prepare adjusting entries for unrealized loss and tax issues Prepares adjusting entries for unrealized loss and tax issues, but entries contain inaccuracies Does not prepare adjusting entries for unrealized loss and tax issues 12.5 Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Management Brief: Other Sources of Comprehensive Income Identifies sources of other comprehensive income not included in net income Identifies sources of other comprehensive income not included in net income, but sources identified are cursory or response contains inaccuracies Does not identify sources of other comprehensive income not included in net income 12.5 Management Brief: Comprehensive Income Explains rationale for the inclusion as comprehensive income (as opposed to net income) of nondisclosure within notes Explains rationale for the inclusion as comprehensive income (as opposed to net income) of nondisclosure within notes, but response is cursory or contains inaccuracies Does not explain rationale for the inclusion as comprehensive income (as opposed to net income) of nondisclosure 12.5 Management Brief: Stockholder Equity Evaluates impacts of company goals and finances for their implications on stockholder equity, using financial information to support claims Evaluates impacts of company goals and finances for their implications on stockholder equity, but response is cursory or inaccurate or financial information used to support is cursory or illogical Does not evaluate impacts of company goals and finances for their implications on stockholder equity 12.5 Management Brief: Retained Earnings per Share Evaluates impacts of company goals and finances for their implications on retained earnings per share, using financial information to support claims Evaluates impacts of company goals and finances for their implications on retained earnings per share, but response is cursory or inaccurate or financial information used to support is cursory or illogical Does not evaluate impacts of company goals and finances for their implications on retained earnings per share 12.5 Management Brief: Preferred Stock or Debt Explains the impact of issuing preferred stock or debt for determining changes to equity structures Explains the impact of issuing preferred stock or debt for determining changes to equity structures, but explanation is cursory or illogical Does not explain the impact of issuing preferred stock or debt 12.5 Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Management Brief: Current Tax Structure Assesses the impact of accounting for income taxes and disclosure issues relevant to the company Discusses accounting for Income taxes encountered, but explanation of temporary and permanent tax differences is cursory or illogical or contains inaccuracies Does not assess the impact of changes to current tax structure 12.5 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 12.5 Total 100% ACC 309 Final Project Scenario Peyton Approved 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 $5,235,000 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. This item was not previously included in the income tax calculation. 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. The tax associated with book depreciation was previously recorded to income tax expense and current income tax payable. Prepare the adjusting entry for the deferred tax. There have been recent tax structure changes that 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 stock—Every 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. Note 9—Accumulated Other Comprehensive Loss Changes in the composition of accumulated other comprehensive loss for 2014, 2015, and 2106 are as follows (in millions)— Foreign currency translation adjustments Unrealized gains on available-for- sale securities Total Balances as of January 1, 2014 $ (187) $ 2 $ (185) Other comprehensive income(loss) (325) (1) (326) Balances as of December 31, 2014 (512) 1 (511) Other comprehensive income(loss) (210) (2) (212) Balances as of December 31, 2015 (722) (1) (723) Other comprehensive income(loss) (279) 17 (262) Balances as of December 31, 2016 $ (1,001) $ 16 $