Need help with the adjusting entries Comprehensive income items · Marketable sec

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Need help with the adjusting entries

      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 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 ACC309 Intermediate Accounting III Expert Q&A IMPORTANT NOTE: Make sare to completely review the Rubric for Milestone Use the data from this Milestone and bagin working on your final peesentation due in Week ITEMS TO COMPLETE FOR THIS MILESTONE: GENERAL In preparation of the anneal audit, prepare appeopriate adjusting encries and post to the trial halasce workbook (ned tab) ADJUSTING ENTRIES Prepare adjusting entries for unrealized loss Prepare adjusting entries for tax issues MANAGEMENT BRIEF-Prepare in a Word document-see the rubric for milestone A. Identily sources of other compeehensive income not included in net income B. Explain rationale for the inclusion as compechensive income (as opposed to net income) of nondisclosure wihin sotes C. Evaluate impacts of company goals and finances for their implications on stockholder equity,using financial infomation to suppot claim D Evaluate impacts of company goals and finances for their implications on retained canings per share. funul infor uinto sp c E. Explain the impact of issuing preferred stock or debt for determining changes to equity structures. F. Assess the impact of changes to current tax structure for articulating changes relevant to the commpany FINANCIAL INFORMATION FOR THIS MILESTONE Comprehensive incomc itoms Marketable securities on the balance sheet at a cost of $5,500,000 are available-foe-sale Market value at the balance sheet date is $5,235,00 Prepare the adjusting entry to record the unrcalized loss and include in compechensive income Tax information and implications $1,500 in meal and entertainment expenses show as a penmanent difference for tax. Prepare the necessary adpsting entry The company uses straight line depreciation for book and MACRS depreciation for the tax return MACRS deprociation was $209,301 higher than book Prepare the adjusting entry for the deferred tax There have been receet tax structure changes the could impact the company. Peyton Approved has been a C Corp since the beginning orthese changes. Peyton provides fr taxes at 25% of pretax income (20% Federal, 9% sien Stockholder Equity Peyton Approved prides itself on transparency with shareholders and investors. The company has added two stonefront locations and launched a new marketing campaign, which is estimated to bring in 20,000 new customers over the neat 6 monchs The company expects this expansion will require an additional $1,000,000 of capital and generate an additional 5600.000of after-tax profit. The options are l) bsuing an additional S 1,000,000 of 10%, 100-par convertible preferred stock (same class as ts currently 2) Issue an additional S 1.000.000 of 8% convertible bonds (same arms as the custing issue) 3) $500,000 each of peeferred stock and bonds

Explanation / Answer

Answer to Question No. 1

Unrealized loss on Marketable Securities : Available for Sale

$5,500,000 - $5,235,000 = $265,000

The journal entry to record this change in market value would be as follows:

Unrealized loss on Marketable Securities : Available for Sale -    Debit         -    $265,000

Marketable Securities: Available-for-Sale -                                        Credit        -   $265,000

In the balance sheet, the unrealized loss account balance of $265,000 is subtracted from stockholders' equity.

Answer to Question No. 2

For the Income tax purposes 50% of meals and entertainment expenses is allowed as deduction.

Therefore, 50% of $1500 i.e. $750 will be deducted in computing net income for tax purposes. Consequently, tax liability at the applicable rate will be reduced to that extent.

The journal entry will be as follows:

Provision for Income Taxation – Debit ($750 X Applicable tax rate)

Tax Expenses – Credit ($750 X Applicable tax rate)

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