On August 1, 2017 FF was notified by its legal counsel that FF was being sued by a former employee regarding her termination of employment from FF.

On August 1, 2017 FF was notified by its legal counsel that FF was being sued by a former employee regarding her termination of employment from FF. On December 21, 2017, a legal settlement was reached with this terminated employee. As part of the settlement, FF agreed to pay the employee a settlement amount of $190,000 on January 10, 2018. FF accrued this expense on its 2017 financial statements.

FF maintains a portfolio of tax-exempt securities (none of which is a private activity bond) and publicly-traded stocks as a measure to provide immediate liquidity if needed (none of these investments is debt financed). All of these securities originate from less than 20% owned domestic corporations.

From inception until this year the Rapid Coaster had been FF’s main attraction. However due to safety, crowd appeal, and other factors, FF disposed of the Rapid Coaster on March 1, 2017 and purchased a new attraction known as the Vomitnator. The Rapid Coaster originally cost $2,000,000 and was placed in service on September 1, 2006. The Rapid Coaster was fully depreciated for book and regular depreciation purposes.

The Vomitnator was installed and rendered operational on March 1, 2017.  The Vomitnator cost $6,000,000 to acquire, install, and make ready for service.

FF’s regular tax depreciation for the year is correctly calculated as $1,112,499 before considering the 2017 addition of the Vomitnator. FF does not want to claim any current year bonus depreciation. 

Near the end of the year, FF switched its property and casualty insurance company. As a result, the plan year for its insurance contract was altered. On December 31, 2017 FF prepaid insurance premiums of $25,000 representing coverage through February 15, 2018 as a condition of being accepted by the new company. FF did not expense any of the prepayment for financial accounting purposes

FF rents from vendors several pieces of equipment to use in its business. As of December 31, 2016 and December 31, 2017, respectively, FF had prepaid vendors for equipment rental of $30,000 for January 2017 and $35,000 for January 2018.

On December 26, 2017 FF prepaid a contractor $17,500 to repair several pieces of maintenance shop equipment in January of 2018. FF fully expects that the contractor will have completed the project by January 31, 2018.

All the accrued wages and bonus amounts on the financial statements as of December 31, 2017 were paid on February 28, 2018.

As of December 31, 2016 and 2017, respectively, FF had vacation accruals on its books of $29,000 and $35,000. As of March 15, 2017 and 2018, respectively, FF had paid $5,000 and $8,000 of those accrued amounts.

On December 2, 2017, the millionth customer entered the park. To recognize the accomplishment and to promote the amusement park through print and radio media advertisements, FF held a give-away contest wherein the lucky customer deemed to be the millionth customer would be given $100,000. The check was presented to the lucky winner on January 15, 2018. 

The land on which FF resides is owned by the county. FF has a very favorable lease with the county that allows FF the ability to sublease any portion of the ground to another tenant. The board of directors of FF made the decision in the fall of 2017 to seek out a tenant for unimproved land that would not be utilized in any potential expansion plans. FF identified the potential renter and entered into a contract with the renter on December 1, 2017. The rent period is to begin on January 1, 2018; however, as part of the contract, the renter was required to pay a full six-month rental amount ($50,000) to FF by December 31, 2017. FF received a check of $50,000 on December 27, 2017 from the renter. This rental payment is not refundable to the renter under any circumstances.

FF maintains an inventory of several items that it uses in its amusement park. Inventory is valued at cost. FF has never has never changed it inventory method. FF uses specific identification for its inventory. FF has never written down any subnormal goods. The rules of Section 263A (Unicap) apply to FF. The Unicap calculated costs related to ending inventory at December 31, 2016 and 2017, respectively, were $15,000 and $19,000.

On December 1, 2017, FF paid a $400,000 dividend to all common stockholders.

During the year, FF made federal estimated income tax payments of $72,500 each on April 15, June 15, September 15 and December 15 of 2017 ($290,000 in total). If FF has overpaid its current year estimated taxes, it would like to apply the excess to its estimated tax payments for next year. FF is NOT a “large corporation.” FF’s 2016 tax liability was $200,000.

FF made California state estimated income tax payments of $15,000 each on April 15, June 15, September 15 and December 15 of 2017 ($60,000 in total).

FF does not have a minimum tax credit carryover from 2016.

Financial Statements (kept on a GAAP basis):

FUN FAIR OF VENTURA, INC.

Balance Sheet

Assets:                                                             12/31/16                                12/31/17

Cash                                                                $    165,000                            $   119,000

Accounts Receivable                                             128,000                                  75,000

Less: Allowance for Bad Debts                                (43,000)                                 (49,000)

Inventory                                                              422,000                                  390,000

Tax-exempt Securities                                            150,000                                  150,000

Publicly Traded Stocks                                           200,000                                  200,000

Fixed Assets                                                       24,000,000                            28,000,000

Less: Acc. Depreciation                                     (13,542,000)                           (12,892,000)

Prepaid Insurance                                                             0                                      25,000

Prepaid Rent                                                            30,000                                    35,000

Prepaid Installation Contract                                          0                                     17,500

Other Assets                                                           150,000                                 250,000

Total Assets:                                                    $11,660,000                           $16,320,500

Liabilities and Shareholders’ Equity:

Accounts Payable                                                    48,000                                    62,000

Accrued Wages                                                       123,000                                 118,000

Accrued Bonuses                                                     68,500                                    39,000

Accrued Vacation                                                     29,000                                    35,000

Legal Settlement Accrual                                                 0                                   190,000

Prize Accrual                                                                      0                                  100,000

Unearned Rental Income                                                 0                                     50,000

Note Payable-First Bank of CA (Credit Line)           1,540,000                             1, 084,000

Note Payable-Equipment Leasing, Inc.                   7,112,000                           11,728,000

Capital Stock                                                           100,000                                 100,000

Additional paid-in Capital                                    2,000,000                              2,000,000

Retained Earnings-Unappropriated                         639,500                                  814,500

Total Liabilities and Shareholders’ Equity:         $11,660,000                          $16,320,500

Income Statement for the period ending December 31, 2017

Item                                                                          Amount

Income:

Gross Sales                                                                 $26,523,275

Less: Returns                                                                   (113,500)

 Net Sales                                                                    26,409,775

Cost of Goods Sold                                                         (2,052,500)

Dividend Income                                                                 4,300

Interest Income                                                                    2,650

Municipal Bond Interest Income                                            2,300

Total Income:                                                               24,366,525

Expenses:

Employee Salaries                                                        13,905,600

Repairs and Maintenance                                                  492,350

Bad Debts                                                                           58,000

Rent                                                                               1,543,000

Payroll Taxes                                                                  1,112,400

Licensing Fees                                                                     10,750

Property Taxes                                                                  277,000

Interest Expense                                                               781,000

Depreciation                                                                  1,350,000

Office Supplies                                                                    33,950

Employee Training                                                               53,750

Safety Expenses                                                                  31,000

Political Contribution                                                           2,500

CA Safety Commission Fine                                                   5,000

Advertising                                                                       290,500

Admission Supplies                                                           143,250

Meals and Entertainment                                                    8,500

Travel                                                                                13,550

Insurance                                                                        215,000

Legal Settlement                                                             190,000

Prize Contest Expense                                                     100,000

Fuel                                                                               158,675

Utilities                                                                         2,530,500

Telephone                                                                       135,250

Total Expenses before taxes:                                        $23,441,525

CA state income tax expense                                               60,000

Federal tax expense                                                          290,000

Total income taxes                                                          $350,000

Net Income:                                                                 $ 575,000

How do I complete schedule M-1 and schedule j from this information?







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