Question

I only need help with the adjusting entries to make sure I have them correct.

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 Determine the impact on earnings per share for each option. 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 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. Can someone please show me the 'correct' adjusting entries for the trial balance only, with the 'correct' ending balances for the trial balance only? I just want to make sure my figures are correct before moving to the financial statements. Thanks so much!!

Answer 1

SOLUTION:

Solution:

Journal entries:

Particualars	Debit	Credit
Ovens on Lease	101,513.84
Lease Liability		101,513.84
Lease Liability	14,924.31
Interest Expense	5,075.69
Cash		20,000.00
Depreciation Expense (101,513.84/6 years)	16,918.97
Accumulated Depreciation		16,918.97

Pension Layout:

Particualars	Debit	Credit
Pension Expense	107,041.70
Accrued Pension Liability		107,041.70
Retired Employees Health Insurance	43,718.91
Accrued Employees Health Insurance		43,718.91

Working:

Capital Leases:

Year	Lease Payment	PVF @ 5%	Present Value
1	20,000	0.95238	19,047.6190
2	20,000	0.90703	18,140.5896
3	20,000	0.86384	17,276.7520
4	20,000	0.82270	16,454.0495
5	20,000	0.78353	15,670.5233
6	20,000	0.74622	14,924.3079
			101,513.8413

Lease Amortization Schedule:

Year	Lease Payment	Interest	Lease Rental	Balance
1	20,000	5,075.69	14,924.31	86,589.53
2	20,000	4,329.48	15,670.52	70,919.01
3	20,000	3,545.95	16,454.05	54,464.96
4	20,000	2,723.25	17,276.75	37,188.21
5	20,000	1,859.41	18,140.59	19,047.62
6	20,000	952.38	19,047.62	0.00