2019). As a long term lease for Peyton Approved the monthly lease payment of $20,000 with a term lease of 6 years and interest rate at 5%, then after 6 years the total capital lease obligation is $101,513.82. Peyton Approved would record the remaining lease payments as a liability and equipment as an asset. Peyton Approved would have to deduct the interest portion of the financing as interest expense and depreciation of the equipment as depreciation expense. Expenses reduce net income so the capital lease is lower in taxes than operating lease. Postretirement plans will impact the company financially short term and long term because they are pension plans that are a type of off balance sheet financing. For short term accounting, Peyton Approved has 60 employees in total, pension liability is $ 107,041.70 without health insurance liability. Health insurance liability is $43,718.91 which adds service cost and interest cost. Service cost is additional liability when each year passes and another year of service is completed. Interest cost is additional liability because employees are one year closer to retirement. At the end of the year the plan asset is underfunded. For long term accounting pension payout is $63,322.79. Peyton Approved will contribute cash from the company’s bank account and that will increase the fund. At the end of the year the plan asset is overfunded and therefore the pension cost is reported on the income statement and reduced reported earnings. Peyton Approved’s current performance is good. Current ratios help investors and creditors see how easily a company can pay off it’s current liabilities, gives a better understanding of the liquidity of the company. Current ratio is calculated by dividing current assets by current liabilities. In Peyton Aproved’s curent ratio is 3.81 (15,847,105.00/4,159,473.40) so this means Peyton Approved has 3.81 times more current assets
than current liabilities so it shows they can pay current debt payments. Retrospective will affect the financial statements for previous periods. Retrospective is implementing new accounting policies for transaction, event, or other circumstances as if it had been implemented. Peyton Approved didn’t change their accounting policies or standards but there were errors that came up. An example would be the $50,000 spent on the patent for the dog treats formula. It was incorrectly charged to Miscellaneuos Expense. Prospective is implementation new accounting policies for transaction, event, or other circumstances after new accouting pactices or estimation have been implemented. Peyton Approved didn’t implement any new accounting policies. New credit policies will affect the company’s sales because when you have a creidt policy it allows people to purchase products or services they wouldn’t buy right away. A credit policy is important because it shows the company can lend money as well as collect. There was
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