ACC 309 Milestone Two Guidelines and Rubric Overview: For Milestone Two, which is due in Module Five, you will develop a portion of the workbook and a brief memo to management explaining the impacts...

ACC 309 Milestone Two Guidelines and Ru
ic

Overview: For Milestone Two, which is due in Module Five, you will develop a portion of the workbook and a
ief memo to management
explaining the impacts of accounting for leases and postretirement benefits. You will build on this milestone in subsequent modules to create
the balance sheet and executive summary portions of your final project.

Prompt: Using your review of the Final Project Scenario document, begin your workbook and develop the second part of your executive
summary, including the impacts of leases and postretirement benefits.

Note: Milestone Two is a draft of some of the critical elements of the final project.

Specifically, the following critical elements must be addressed:

I. Workbook
A. Calculate capital lease obligations for determining debt and depreciation.
B. Calculate pension payouts to determine the company’s financial obligations.
C. Prepare adjusting entries for postretirement benefits and capital lease obligations.

II. Management Brief: Compose a report that appropriately communicates the impact of revisions to stakeholders.
A. Explain the implications of capital lease based on how it relates to the company’s equipment usage.
B. Explain how postretirement plans will impact the company financially in the short and long term, using examples from the
accounting workbook to support claims.

Ru
ic
Guidelines for Submission: Your workbook must be submitted as a Microsoft Excel document, and your management
ief should be a 1- to 2-
page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins.

Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Workbook: Capital
Lease Obligations
Calculates capital lease
obligations for determining
debt and depreciation
Calculates capital lease
obligations for determining
debt and depreciation, but
calculations are inaccurate
Does not calculate capital lease
obligations
19
Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Balance Sheet:
Pension Payouts
Calculates pension payouts to
determine the company’s
financial obligations

Calculates pension payouts to
determine the company’s
financial obligations, but
calculations are inaccurate

Does not calculate pension
payouts
19
Balance Sheet:
Adjusting Entries
Prepares adjusting entries for
postretirement benefits and
capital lease obligations
Prepares adjusting entries for
postretirement benefits and
capital lease obligations, but
entries prepared contain
inaccuracies
Does not prepare adjusting
entries
19
Management Brief:
Capital Lease
Explains the implications of
capital lease based on how it
elates to the company’s
equipment usage
Explains the implications of
capital lease based on how it
elates to the company’s
equipment usage, but
explanation is cursory or
illogical
Explain the implications of capital
lease
19
Management Brief:
Postretirement Plans
Explains how postretirement
plans will impact the company
financially in the short and long
term, using examples from the
accounting workbook to
support claims
Explains how postretirement
plans will impact the company
financially, but examples
provided are cursory or illogical
Does not explain how
postretirement plans will impact
the company
19
Articulation of
Response
Submission has no major e
ors
elated to citations, grammar,
spelling, syntax, or organization
Submission has major e
ors
elated to citations, grammar,
spelling, syntax, or organization
that negatively impact
eadability and articulation of
main ideas
Submission has critical e
ors
elated to citations, grammar,
spelling, syntax, or organization
that prevent understanding of
ideas
5
Total 100%


ACC 309 Final Project Scenario
Peyton Approved

Overview
Imagine that you are working as a financial accountant for Peyton Approved, and you have been
charged with revising its financial information. The company has experienced tremendous growth in the
past three years, and it is now a well-known bakery chain for pet products. They have become a publicly
traded company and have several locations that they deliver to regionally.

You will find the company’s financial information in the Peyton Approved Balance Sheet and Income
Statement. This document will need revisions and appropriate notes added in order to prepare for the
year-end audit accordingly. In addition to ensuring that the balance sheet is ready for the year-end
audit, you will address other major areas of need, including:

 Assessing tax implications
 Evaluating and explaining stockholder equity
 Accounting for postretirement benefits (The amounts would be determined by actuaries.)
 Assessing impacts of leases

Peyton Approved Financial Information
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 $5,235,000
 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. This item
was not previously included in the income tax calculation. Prepare the necessary adjusting
entry.
 The company uses straight line depreciation for book and MACRS depreciation for the tax
eturn.
 MACRS depreciation was $209,301 higher than book. The tax associated with book depreciation
was previously recorded to income tax expense and cu
ent income tax payable. Prepare the
adjusting entry for the defe
ed tax.
 There have been recent tax structure changes that 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).

Potentially Dilutive Securities
Peyton has the following potential dilutive securities:
$4,000,000 in bonds payable 10%, 20 year. Every $1,000 bond can convert to 5 shares of
common stock.
Prefe
ed stock—Every share issued can convert to 1 share of common stock.
Expansion Plans
The company is adding two storefront locations and launching a new marketing campaign, which is
estimated to
ing in 20,000 new customers over the next six 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 financing options are:

1. Issuing an additional $1,000,000 of 10%, 100-par convertible prefe
ed stock (same class as is
cu
ently outstanding)
2. Issuing an additional $1,000,000 of 8% convertible bonds (same terms as the existing issue)
3. Issuing $500,000 each of prefe
ed stock and bonds

Postretirement Benefits
Peyton Approved has revised its postretirement plan. It will now provide health insurance to retired
employees. Management has requested that you report the short- and long-term financial implications
of this.
 The company is cu
ently employing 60, and actuaries estimate that the company has a pension
liability of $107,041.70.
 The estimated cost of retired employees’ health insurance is $43,718.91.
 Prepare adjusting entries for the pension liability and the health insurance liability.

Leases
 Six ovens were rented on December 31, with $20,000 charged to rent expense. The lease runs for
6 years with an implicit interest rate of 5%. At the end of the 6 years, Peyton will own them. Make
any necessary adjusting entries.

Other Items
 On December 31, 20XX, the company repaired a packaging machine at cost of $27, XXXXXXXXXXIt is
expected that the repair will extend the life of the machine by four years. No depreciation is
necessary this year. The initial entry recorded the repair to the repair and maintenance account.
 The company spent $50,000 to obtain and defend a patent for its formula for dog treats. The
patent took effect on 1/1/20XX and provides 20 years of protection. The $50,000 amount was
inco
ectly charged to Misc. Expense
 Make any necessary adjusting entries.

Note 9—Accumulated Other Comprehensive Loss

Changes in the composition of accumulated other comprehensive loss for 2014, 2015, and 2106 are as
follows (in millions)—
Foreign cu
ency
translation
adjustments
Unrealized gains
on available-for-
sale securities Total
Balances as of January 1, 2014 $ (187) $ 2 $ (185)
Other comprehensive income(loss XXXXXXXXXX)
Balances as of December 31, XXXXXXXXXX)
Other comprehensive income(loss XXXXXXXXXX)
Balances as of December 31, XXXXXXXXXX)
Other comprehensive income(loss XXXXXXXXXX)
Balances as of December 31, 2016 $ (1,001) $ 16 $ (985)

Amounts included in other comprehensive loss are recorded net of their related income tax effects.

Final Project Checklist

___Completed Excel File
___Word File 1: Notes to the Financial Statements
___Other Comprehensive Income/Loss
___Word File 2: Executive Summary
___A. Identify Other Comprehensive Income
___B. Rationale for Other Comprehensive Income
___C. Stockholder Equity
___D. Retained Earnings per Share
___E. Prefe
ed Stock or Debt
___F. Cu
ent Tax Structure
___G. Capital Lease
___H. Postretirement Plans
___I. Cu
ent Performance
___J. Retrospective and Prospective Approaches
___K. New Credit Policies
___L. Accounting Standards
___M. Four-Step Process