C Corps - Advantages and Disadvantages | CT Corporation. (n.d.). Retrieved from - and-disadvantages. Hargrave, M. (2019, March 12). How Return on Equity Works. Retrieved from Kenton, W. (2019, March 12). Understanding Earnings Per Share (EPS). Retrieved from Kenton, W. (2019, April 04). Generally Accepted Accounting Principles (GAAP). Retrieved from Kenton, W. (2019, April 15). How the Current Ratio Works as a Liquidity Ratio. Retrieved from Notes to the Financial Statements Note 1 – Comprehensive Income
Marketable Securities : Investments allocated as available-for-sale are documented at Fair Value with unrealized gains and losses, net of tax, and recorded into accumulated other comprehensive income. Market Securities had an investment of $5,500,000 where it holds for trading reasons. The stock value had declined to $5,235,000 and the unrealized loss without truly selling securities that have been recorded by the company is $265,000. Therefore, the comprehensive income had reduced on top of the increase of the unrealized loss on the marketable securities held for sale. Note 2 – Tax Information & Implications Adjustment / Permanent Difference : There is a permanent difference for tax of $1,500 in entertainment and meal expenses. This was calculated at a tax rate of 25%, this resulted in an increase of income taxes and decreased the income tax payable by $375. Tax Structure: Due to the recent tax structure changes, it can have impacts on the company. Since Peyton Approved has been a C- Corporation prior to the tax structure changes, the pretax income is reported at 25%. As a result, the allocations are as followed: Federal Tax – 20% State Tax – 5% Note 3 – Depreciation The company uses the Straight-Line depreciation for book value along with MACRS for tax returns. MACRS Depreciation was $209,301 more than the book value which resulted in the Deferred Tax Liability to increase and the Deferred Tax Expense to decrease by 25% of $209,301.00 or $52,325.25. Note 4 – Stockholder Equity
With the two added storefront locations and the added estimated 20,000 new customers to gain within the next 6 months; the company, Peyton Approved, anticipates the accumulations to cost $1,000,000. They will issue extra stocks and bonds to obtain the capital required. The income of the two new storefronts is expected to generate an estimated $600,000 after tax profit. Note 5 – Postretirement Benefits The retirement plan has been modified to incorporate health insurance to its retired employees’. The estimated cost of retired employees’ health insurance is $43,718.91 and $107,041.70 is the amount of the pension liability for their current 60 employees. Note 6 – Equipment On December 31, 20XX, there were six ovens rented. The lease for this is for 6 years with an implicit interest rate of 5% and at the end of this term; Peyton Approved will have full ownership. The Fair Value of Lease Obligation is $106,589.53 and the total cost will calculate $120,000 with the interest expense of $13,410.60. Note 7 – Patents In order to attain and defend a patent for a formula for dog treats, the company had to spend $50,000. The patent is effective on 1/1/20XX and it provides protection for 20 years. The amortized patent is at $2,500 for the current year.
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