ACC 3093 Milestone 1 Management Brief.docx - Andrews A Milestone One Management Brief Alexis Andrews Milestone One Management Brief ACC-309 Intermediate

ACC 3093 Milestone 1 Management Brief.docx - Andrews A...

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Andrews, A Milestone One: Management Brief Alexis Andrews Milestone One: Management Brief ACC-309: Intermediate Accounting III Southern New Hampshire University
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As Peyton Approved, a well-known pet bakery, has experienced tremendous financial growth over the past few years, it has become necessary for the company to turn to a more advanced accounting system. This is especially because the company has become publicly traded. Before its year-end audit, it is necessary to review and revise the Balance Sheet and Income Statements, as well as analyze where the company is headed in its operations. The first item to review is comprehensive income. This includes anything not included in net income, such as pension benefits, unrealized gains and losses, and items of foreign income (Wahlan, Jones, and Pagach, 2017). At this point of review, we can determine that Peyton does have an unrealized loss on its balance sheet. This is due to their marketable securities, which are worth $5,500,000 at cost. They are currently available for sale, and their value on the market is now $5,235,000. For this reason, if Peyton were to sell that securities at this point in time they would lose $265,000 on the transaction. This gets disclosed on the Balance Sheet so that shareholders can understand the evaluation of their investments in these securities. The purpose of including other comprehensive income is for evaluation. These items cannot be included in income because they are not realized items (Corporate Financial Institute). They are only projections of changes to the equity in a company. For example, including foreign currency conversions is not realizing any more or less money. It is simply a conversion. Reporting unrealize losses also does not mean that the loss has happened, it is just a means for owners of the company to evaluate their financial strategies. Since Peyton’s marketable securities are currently down in market value, they should consider holding onto the securities until the market prices go back up. 2
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Peyton Approved has also expanded in the past year, adding two storefront locations and launching a new marketing campaign in order to generate another 20,000 customers in the next six months. In order for this to be successful, the company needs to generate an additional $1,000,000 in capital. They have three ideas on how to do this. The first method they could use is to issue $1,000,000 worth of 10%, $100-par convertible preferred stock. This method is usually seen as a desirable way to raise capital. It offers a greater flexibility than issuing common stock because it does not dilute the worth of its current common stock (Weiss, 2014). However, issuing convertible preferred stock could also have a negative impact. Peyton could potentially not sell the stock they have issued. Preferred stock is not always attractive to investors because they are
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