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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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I became totally and permanently disabled after a working for 44 years. I returned to college late in life (while working full-time) to fulfill my dream of becoming an RN and at that time found it necessary to secure student loans. Three years after being declared totally and permanently disabled my student loans were discharged. In January 2013 we received a 1099-C form declaring said student loans that were discharged however that amount could be considered as income for 2012. This was a large amount of money and we live on two pensions and social security income.

I started looking on the internet for information regarding 1099-C and felt that this was something that we could not handle alone. I made phone calls locally to a very reputable tax group in a city near us and they said it would cost $500 for an appointment and that they really prefer to do corporate taxes and they referred me to a local person who had worked for them at one time, we called and explained the situation and an appointment was made and then the comment was made that "I will have to do some research on this" and flags immediately went up and we called back and cancelled that appointment. I had been researching the IRSwebsite and every place else I could think of and I was not comfortable doing our own taxes this year. We called another local tax preparer that we had used in the past and made an appointment, however prior to the appointment, while still seeking information regarding our situation,

I came across a website for Gary l. Bode, MSA, CPA, PC in Wilmington, NC. I called Mr. Bodeand explained our situation and asked if he could help. He spoke very knowledgeably regarding the situation and stated that yes; he felt he could help us. As Mr. Bode was in North Carolina and we were in New York I scanned all of our documents including back-up documents for all of our claims and forwarded all to him. Mr. Bode kept in touch with us via email; we have spoken on the telephone several times and have become very comfortable with his knowledge and professionalism. Also, as I am a true "worrier" I have continued looking into information regarding our tax situation and I came upon another web page for Mr. Bode that included testimonials which spoke of his experience with this type of tax situation as it became prevalent during the recession. This reinforced in our minds that we had made the right decision in hiring this person as our tax preparer.

I share all of this as our taxes are now ready to be filed (we do owe tax for 2012 but not the astronomical figure we thought we were facing), and we are confident that they have been prepared with the utmost care by a gentleman who has an excellent working knowledge of the situation we faced and the tax laws that were applicable to said situation.

 

Bill and Carol

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Historical Cost as a Balance Sheet Issue in Small Business Accounting

A Wilmington NC CPA and tax accountant discusses small business accounting

Do you need help in getting the most managerial use from your small business accounting? Please consider calling us at (910) 399-2705 for a free initial consult.

Let’s look at the issue of Balance Sheet historical cost from the perspective of  Wilmington NC Widgets’ CPA, our demo company.  Typically, small business accounting doesn’t get the same managerial usefulness from the Balance Sheet as Fortune 500 companies do.  A real shame.                                                                        

“Balance Sheet components can be used to build powerful managerial tools like the Fortune 500 companies use. ”
Gary Bode, CPA
Wilmington NC Tax Accountant

Example: Land Over and Under Valued on Balance Sheet

The Balance Sheet is one of four inter-connected Financial Statements in small business accounting.  It shows the company’s assets, liabilities and owner equity at a specific point in time. Sort of a snapshot of the company’s financial position.  But required accounting conventions can distort that snapshot.  Here’s an example of historical cost, one of those accounting conventions.

Wilmington NC Widgets owns a piece of land they hope to build a manufacturing plant on: 10 acres they bought in 1994 for $600,000, which is what their current Balance Sheet lists it as under Long Term Assets. The acreage was a dump site and junk yard for 40 before they purchased it. But even without any additional work, in 2000, the CPA estimates it was readily saleable at 1.2M.  But the Balance Sheet still had to list it at the original historical cost of $600,000.  So in 2000, Wilmington NC Widgets had an additional $600,000 of assets not listed on the Balance Sheet. 

Then WNW started hauling off the junked cars to the scrap metal recycler.  The owner’s Wife took an interest and landscaped the perimeters, especially along the access road.  So, in 2007, with a robust Wilmington economy, the CPA received an unsolicited offer to purchase it for 1.5M.  But the Balance sheet still showed it at the historical cost if $600,000.  So in 2007, Wilmington NC Widget’s small business accounting had $900,000 of assets not listed on the Balance Sheet.

Finally, in 2011, the land is ready for construction, but the CPA for Wilmington NC Widgets calculates they can’t afford to build until 2013, despite having the site paid for and prepped. Realistically, in the recession, they could sell the land for $500,000.  So 2011’s small business accounting over values the land by $100,000 on the Balance Sheet.

The property is always listed at the historical cost of $600,000 on the Balance Sheet.  Most of that time, it could have been sold for more than that.  At one point, it was under valued on the Balance Sheet by $900,000.  Now, in 2011, despite improvements to the land, it is over valued on the Balance Sheet by $100,000.

While you don’t have to be an accountant to understand Balance Sheets, US GAAP (Generally Accepted Accounting Principals) requires using conventions that can impede their usefulness for managerial purposes.  Historical Cost is only one of them.  Your CPA should show you how to translate your Balance Sheet for managerial use.

If you need a free initial consult on this or any tax or accounting issue, please feel free to call us at (910) 399-2705.

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