Question

FINANCIAL INFORMATION FOR THIS MILESTONE 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 fo rtaxes at 25% of pretax income (20% Federal,59 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

Answer 1

Answer:

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				265,000.00		5,235,000.00
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			118,200.25			1,160,318.41
Accrued Pension Liability
Accrued Employees Health Insurance
Lease Liability
Deffered Tax Liability					118575.25			118,575.25
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 –Bakery	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	2,604,526.53						2,604,526.53
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 Insurance
Patent Amortization
Unrealized Gain/ Loss on Marketable Securities Held For Sale				265,000.00			265,000.00
Income Taxes	4,168,472.62			118,200.25			4,050,272.37
Deferred Tax Expense				118,575.25			118,575.25
	46,666,780.08	46,666,780.08		501,775.50	501,775.50		46,903,555.58	46,903,555.58

Notes:

1. $1,500 included in meal and Entertainment Expenses will have no effect on deferred tax as it is permanent tax difference and will increase the current tax liability by $375($1,500*25%).
2. MACRS Depreciation used for tax is higher by $209,301, that means expense increased and tax paid would have been reduced by $52,325.25(209,301*25%). This will result in deferred tax liability of $52,325.25.