CMIT 451 Course Final Project Paper The Evil .docx

CMIT 451
Course Final Project Paper
The Evil Corp. Unlimited (ECU) network has been experiencing
exponential growth over the last
year and has also seen a tremendous amount of turnover in its
networking staff. One network
engineer was even caught practicing for his CCIE lab exam in
the ECU production network
environment and is one reason why the environment looks (and
is configured) as you see above.
ECU is seeking help and your company has been given the
opportunity to respond to the ECU
Request for Proposals (RFP). Your RFP, which should not
contain a single CLI command,
should contain your company’s proposal/solution for how ECU
is going to accomplish routing in
their current enterprise network environment given the topology
you see below:
In addition to addressing their current challenges, your proposal
should outline any steps that you
would recommend ECU take to improve their overall network

architecture. Your RFP should
address how ECU will:
1. Implement routing security throughout the network where
appropriate
2. Implement redistribution where required for a fully
functional network
3. Implement eBGP connections to the two (2) Internet Service
Providers (ISPs) along with
all policy required for redundancy
4. Implement iBGP internally in the ECU network where
indicated to include all facets of
an iBGP deployment
5. Implement a solution so that ECU’s network does not become
a transit network for ISP
traffic
6. Address why all of R10’s routes are not showing up in the
network and why R10 sees no
routes from the rest of the environment
7. Address any other routing recommendations to ensure
optimal network operation and
convergence
8. Discuss any future improvements that you would recommend
to ECU for their
environment
At a minimum your proposal needs to meet the following
criteria:

• A title page
• A "running head"
• An abstract (150 words or less)
• A table of contents
• A reference section
• Remember to use double-spacing (including references), a 1"
margin on all sides, and the
Times New Roman 12-point font
• The title page, abstract, references, and all tables and
figures/network diagrams should be
on their own individual pages and the length of your paper
should be between 7-10 pages
inclusive of the title page, abstract, references, and all tables.
• Carefully write your proposal so paragraphs naturally flow
from one to the other
• Remember that your paper is being evaluated based on:
o How well you use the course literature in designing and
carrying out your
proposal
o The logic, justification for, and structure of your proposal
o How realistic what you propose is (could it actually be
implemented)
o How creative your solution is given the topology
o The likelihood that your proposal would really have an
impact/resolve their issues
o Ways in which you will insure the proposal will be carried out
as planned
o Your ability to evaluate the effectiveness of the proposal once
implemented
o The references — relevance, quality, and appropriate usage;

and,
o Writing quality and overall presentation
o ***There should NOT be a single IOS CLI command in your
paper!***
The rubric for your CMIT-451 Course Final Project Paper can
be seen below:
*Your paper should NOT contain a single configuration
command. This is an RFP where
your focus should be on articulating how your company will
provide a technical solution to
the routing challenges facing ECU given the current network
architecture above. You must
address the issues with the provided environment and you
should close your paper with a set
of “recommended next steps” where you can then outline the
changes you would make to
improve their network topology.
Learners must follow the "Publication Manual of the American
Psychological Association, Fifth
Edition (APA- 5)", also known as APA style or format. Only a
Microsoft Word file will be
accepted as the final submission; no HTML or PDF files are
allowed. You must also submit the
TurnItIn document that is generated when you run your paper
through TurnItIn.
All sources must be properly cited and must be credible. At
least two sources must be Internet

sources (for help in evaluating the credibility of web sources,
go to
www.umuc.edu/library/guides/evaluate.shtml). Once you have
completed a good draft, it is
strongly advised that you submit it to UMUC's Effective
Writing Center (EWC). In order to
allow sufficient time for their review, you need to submit the
draft to EWC two weeks prior to
the paper's due date.
9 - 1 0 7 - 0 3 5
R E V : J U N E 2 7 , 2 0 0 7
_____________________________________________________
_____________________________________________________
______
Professor Romana L. Autrey prepared this case. HBS cases are
developed solely as the basis for class discussion. This case is
based on a real
company, but all names (vineyard, winery and people) and some
financial figures have been disguised. For computational and
expositional
purposes, numerous simplifications have been made to the book
and tax situations at Obadiah Vineyard. Cases are not intended
to serve as
endorsements, sources of primary data, or illustrations of
effective or ineffective management.
Copyright © 2006, 2007 President and Fellows of Harvard
College. To order copies or request permission to reproduce
materials, call 1-800-545-

7685, write Harvard Business School Publishing, Boston, MA
02163, or go to http://www.hbsp.harvard.edu. No part of this
publication may be
reproduced, stored in a retrieval system, used in a spreadsheet,
or transmitted in any form or by any means—electronic,
mechanical,
photocopying, recording, or otherwise—without the permission
of Harvard Business School.
R O M A N A L . A U T R E Y
Deferred Taxes at Obadiah Vineyard
Shortly after harvest in October 2004, Luis, Arthur and Scott
Maddox, co-owners of the fledgling
Obadiah Vineyard, toured their vineyard on a day as sunny as
their mood. Not only was the 2004
crop volume everything the three brothers had hoped for, but
the vineyard had also produced fruit of
impressive quality. Their dream of growing Premier Cru quality
wine grapes in the Dundee Hills of
Oregon was well on its way to becoming reality.1
To date, the Maddox brothers had planted and trellised about a
third of their land. With the
vineyard just beginning to take off, Arthur wondered aloud
whether this was the right time to plant
additional acreage. All three brothers acknowledged that more
planting at this point required outside
funding.
As the brothers discussed their options, Luis suggested that he
informally show the vineyard’s tax
returns to their local community bank and some investor friends
to get an idea of how difficult it

would be to raise the needed funds. Scott commented, “The tax
returns show a distorted and, frankly,
bleak picture of the vineyard’s financial situation. For my own
use, I’ve already prepared projected
financial statements using generally accepted accounting
principles (GAAP) for our existing planting.
Let’s show potential investors these GAAP projections—
updated for the new planting—instead.
GAAP presents a more accurate picture of the vineyard’s
financial position than tax returns because
it includes the deferred tax assets and liabilities.” Luis
responded, “Who cares? The cash flows are the
same regardless of accounting method. Plus, deferred taxes will
make the financial statements harder
to understand.” Arthur compromised, “Scott, you can prepare
the prospective financials if you like,
but you’ll have to explain them to us before we can use them.”
Oregon Wine Industry
The Oregon wine industry had grown rapidly over the last
several years. The industry had grown
to over 300 licensed wineries, and winery sales had nearly
doubled in the last ten years. Grape
acreage had also doubled in the last decade, and grape value
nearly quadrupled.2 Based on the
1 Premier Cru (abbreviated “1er Cru”) designated certain
vineyards in the Burgundy region of France capable of
producing
distinctly superior wine. The only higher Burgundy
designation was Grand Cru (literally “great growth” in French),
which
included 34 particularly favored vineyards that produced wine a
decided notch above Premier Cru. Jancis Robinson, The

Oxford Companion to Wine (Oxford University Press, 1999),
pp. 313 and 545.
2 Source: press release dated 1/31/2006 of the Oregon Wine
Board (website www.oregonwine.org, accessed 8/22/2006).
For the exclusive use of y. sun, 2019.
This document is authorized for use only by yueshuang sun in
ACC423 Financial Reporting I (Schonberger, Fall-A 2019)
taught by MELANIE MARTIN, University of Rochester from
Aug 2019
to Nov 2019.
107-035 Deferred Taxes at Obadiah Vineyard
2
prevailing selling prices and farming costs for Pinot Noir in the
Dundee Hills, the vineyard set
profitability targets (for fully mature vines) as follows:3
Sales price per ton, Pinot Noir $ 3,200
times: Target tons per acre x 2.5
Target revenue per acre $ 8,000
less: Farming cost per acre (2,500)
Target profit per acre $ 5,500
History of Obadiah Vineyard

The opportunity to launch Obadiah Vineyard came in 2000. An
undeveloped but promising
property was offered for sale: the 38-acre plot had been an
established vineyard in the past before the
current owner had razed the vineyard for horse land, and it
bordered one of the most desirable
vineyards in the Willamette Valley. In late 2000, the Maddox
brothers organized as Obadiah
Vineyard LLC and purchased the land for $400,000. They
financed the purchase with a small business
loan of $400,000 secured by the property, including the to-be-
planted grapevines.4
Arthur Maddox, the head winemaker at local Leoren Winery,
agreed to oversee the vineyard
operations, which primarily involved instructing the vineyard
laborers in the care of the vineyard.5
This arrangement allowed him to better manage the quality of
his wine at Leoren by giving him
control of the entire process, from the farming to the
winemaking to the eventual bottling.6 In
addition, Arthur committed Leoren to purchase all of Obadiah
Vineyard’s eventual crop. Luis
Maddox, a software engineer in the Silicon Valley, and Scott
Maddox, a certified public accountant in
the Portland, Oregon area, agreed to contribute the initial funds
needed for planting, farming costs
and working capital until the vineyard could produce enough of
a crop (and thus profit) to fund
itself.
The brothers chose to plant an initial 5 acres of Pinot Noir pre-
grafted onto disease-resistant
rootstock. In touring the property to select the site for this
planting, Arthur made a pleasant

discovery: some of the existing rootstock from the prior
vineyard still lived and could be salvaged.
All told, the brothers recovered 7.9 acres of 25-year-old Pinot
Noir vines. The maturity of the
rootstock meant grapes of much more intensity, depth and
character. Further, Arthur hoped that the
recovered vines would bear a full crop sooner than the typical
six years for new vines to come into
full production.7 Consistent with their mission to grow Premier
Cru quality grapes in Oregon, the
brothers set a goal of yielding 2.5 tons of fruit per acre. The
brothers decided that, like other growers
3 Source: the company (disguised).
4 See Exhibit 6 for the loan terms and payment schedule.
5 Typically, a team of vineyard laborers served several smaller
vineyards such as Obadiah.
6 Although winemakers had some say in the viticultural
practices affecting the grapes they had contracted to purchase,
the
vineyard owners made several decisions—such as the type, level
and timing of certain sprays—that could have a major impact
on the resulting wine.
7 The first two years after planting comprised the pre-
productive period, before the vineyard yielded grapes. The pre-
productive period was followed by, on average, three years of
increasing harvests until in the fourth productive year when the
fully mature vines reached full production.

Aug 2019
to Nov 2019.
Deferred Taxes at Obadiah Vineyard 107-035
3
of high quality grapes, they would if needed cut back the grape
clusters to reduce the crop yield to
this target level. This practice concentrated the flavors in the
remaining fruit, sacrificing some
quantity to produce a superior wine.
In early 2001, the LLC planted the 5 acres of Pinot Noir at a
cost of $6,000 per acre and trellised all
12.9 acres—5 new and 7.9 recovered—at an additional cost of
$9,000 per acre. 2001 also marked the
beginning of recurring annual farming costs of $2,500 per acre
per year. Farming costs included both
materials and labor: applying fertilizer, sprays, equipment use,
tending the plants, harvesting,
pruning, and so forth.
In 2003, Obadiah Vineyard harvested its first crop of 7.5 tons,
primarily from the recovered
acreage; in 2004, 18.5 tons were harvested. The grapes sold for
$3,200 per ton. Per standard practice,
the vineyard collected 10% of the total sale price at harvest time
and 90% a year later. This collection
pattern arose historically because the purchasing wineries didn’t
receive revenue until the following

year, when they released the resulting wine. The initial 10%
ensured the vineyard could afford to pay
for the harvest labor.
With the 2004 harvest, Obadiah Vineyard’s gross margin turned
positive for the first time. The
(partially mature) salvaged vines produced more tons of grapes
than projected, and the quality of the
2003 harvest wine “in barrel” at Leoren Winery was extremely
promising.
Deferred Tax Asset and Liability8
For book purposes, Obadiah Vineyard depreciated the plants
and trellis using straight line
method over a useful life of 50 years. However, for tax
purposes, U.S. tax law dictated the
depreciation rates. Designed to stimulate the economy by
encouraging companies to invest in capital
equipment, the Modified Accelerated Cost Recovery System
(MACRS) specified faster cost recovery
for tax purposes than justified by economic reality (see Exhibit
1 for the vineyard’s depreciation
schedule). The MACRS rates did not increase the total tax
deduction allowed for capital
expenditures; they merely shifted the timing to earlier years.
Thus, the vineyard received larger tax
deductions now and would pay correspondingly higher taxes in
future years (see Exhibit 2 for the
vineyard’s deferred tax liability schedule).
By the end of 2004, Obadiah Vineyard had also accumulated a
sizeable net operating loss (NOL),
which consisted of the vineyard’s total negative taxable income
from inception to date (see Exhibit 3
for the vineyard’s tax-basis financial statements and Exhibit 4

for the NOL schedule). Because the
vineyard had not yet paid taxes, the U.S. tax law did not permit
a tax refund for these negative
earnings. However, for tax purposes, the vineyard could offset
these prior operating losses against
future taxable income (up to the NOL amount) to shield it from
tax. Specifically, agricultural NOLs
were to be first be “carried back”—that is, applied to offset any
taxable income in prior periods (none,
in this case) for a refund of taxes paid—and then “carried
forward” up to 20 years—that is, apply any
remaining NOL balance after carryback to offset taxable
income. Any NOL balance more than 20
years old was forfeited. In other words, the early expenses paid
by the vineyard would reduce its tax
payments in future years. (See Exhibit 5 for the vineyard’s
deferred tax asset schedule.)
8 For a brief background summary regarding deferred taxes, see
“Financial Reporting, Tax Reporting and the Role of Deferred
Taxes” by Gregory S. Miller (HBS No. 106-026).
Aug 2019
to Nov 2019.
4

Vineyard Projections
The brothers decided that, if they could obtain the necessary
funds, they should plant all of the
remaining 25.1 acres. As Arthur Maddox prepared the
projections for the vineyard’s harvest tonnage
with and without the additional acreage, he decided to err on the
side of caution. He estimated that
the new planting would have its first harvest in the third year
after planting, and gradually produce
more crop until it reached full production in 2010, when the
vines matured. He was confident that the
vineyard could, barring unusually severe weather, produce the
following tonnage of grapes each
year:
(amounts in tons)
Existing Planting
(12.9 acres)
With Additional
Planting (38 acres)
2005
3
825
3
825
2006
1

432
1
432
2007
1
432 45
2008
1
432 65
2009
1
432 80
2010 and beyond
1
432 95
Planting the remaining acreage involved a one-time cost
$14,000 per acre, or $351,400, for the new
rootstock and trellising. To prepare the vines for productive use
also required two years of annual
farming costs of $62,750 per year (25.1 acres at $2,500 per
acre). The new vines & trellis had an
estimated useful life of 50 years, and Scott decided to
depreciate these new vines accordingly in his
financial projections. Finally, if the new planting were

undertaken, the crop failure insurance
premium would rise by $2,900, increasing the sales, general and
administrative expense (SG&A) to
$5,000 per year.
The brothers decided to seek a $600,000 cash infusion to cover
the planting and start-up costs. The
banker who worked with Scott on the existing vineyard
mortgage told Scott he could obtain a bank
loan of $250,000 with interest at 5.65% for a 20-year term, but
only if Scott were able to find equity
investors for the remaining $350,000 (see loan schedule at
Exhibit 6).
Using these projections and the financial projections he had
prepared based on the existing
planting (see Exhibit 7 for GAAP financial statements), Scott
Maddox sat down to prepare the
projected GAAP financial statements if the new planting were
undertaken.
Aug 2019
to Nov 2019.
5

Exhibit 1 Obadiah Vineyard Depreciation Schedule: Initial 12.9
Acres
Cost: $ 146,100 Vines and Trellis cost (5 x $6,000 + 12.9
x $9,000)
+ 64,500 Cost to prepare land for productive use (2 x
$32,250).a
= $ 210,600 Total initial cost to be depreciated
GAAP Life: 50 years (2% per year)
Tax Life: 10 years
Year
MACRS
Depreciation
Rate
MACRS
Depreciation
Amount
MACRS
Accumulated
Depreciation
GAAP
Depreciation
Amount

GAAP
Accumulated
Depreciation
2001 -- -- -- -- --
2002 -- -- -- -- --
2003 10.00% $21,060 $21,060 $4,212 $4,212
2004 18.00% 37,908 58,968 4,212 8,424
2005 14.40% 30,326 89,294 4,212 12,636
2006 11.52% 24,261 113,556 4,212 16,848
2007 9.22% 19,417 132,973 4,212 21,060
2008 7.37% 15,521 148,494 4,212 25,272
2009 6.55% 13,794 162,288 4,212 29,484
2010 6.55% 13,794 176,083 4,212 33,696
2011 6.56% 13,815 189,898 4,212 37,908
2012 6.55% 13,794 203,692 4,212 42,120
2013 3.28% 6,908 210,600 4,212 46,332
2014-2051 -- -- 210,600 4,212 …
2052 -- -- 210,600 4,212 210,600

Source: Casewriter developed from company information.
aGenerally accepted accounting principles (GAAP) capitalized
expenses that prepared an asset for productive use (such as
labor and overhead), and depreciation began when the asset
began production (in this case, 2003). The U.S. tax code
permitted
capitalization of these pre-production costs (rather than
immediate expensing) and Obadiah Vineyard chose to do so.
Aug 2019
to Nov 2019.
6
Exhibit 2 Obadiah Vineyard Deferred Tax Liability Schedule:
Initial 12.9 Acres
GAAP
Accumulated
Depreciation
MACRS
Accumulated

Depreciation Difference Tax Rate
Deferred
Tax Liability
Change in
Deferred
Tax Liability
2001 -- -- -- 40% -- --
2002 -- -- -- 40% -- --
2003 $4,212 $21,060 $16,848 40% $6,739 $6,739
2004 8,424 58,968 50,544 40% 20,218 13,478
Projected (without new planting):
2005 12,636 89,294 76,658 40% 30,663 10,446
2006 16,848 113,556 96,708 40% 38,683 8,020
2007 21,060 132,973 111,913 40% 44,765 6,082
2008 25,272 148,494 123,222 40% 49,289 4,524
2009 29,484 162,288 132,804 40% 53,122
3,833
2010 33,696 176,083 142,387 40% 56,955
3,833
2011 37,908 189,898 151,990 40% 60,796

3,841
2012 42,120 203,692 161,572 40% 64,629
3,833
2013 46,332 210,600 164,268 40% 65,707
1,078
2014 50,544 210,600 160,056 40% 64,022
(1,685)
2015-2051 … 210,600 … 40% … (1,685)
2052 210,600 210,600 -- 40% -- (1,685)
Aug 2019
to Nov 2019.
10
7-
03
5

-
7-
E
xh
ib
it
3
O
b
ad
ia
h
V
in
ey
ar
d
T
ax
-B
as
is

F
in
an
ci
al
S
ta
te
m
en
ts
: I
n
it
ia
l 1
2.
9
A
cr
es
In
co

m
e
S
ta
te
m
en
t—
T
a
x
B
a
si
s:
I
n
it
ia
l
12
.9
A
cr

es
(
fo
r
th
e
y
ea
rs
e
n
d
ed
D
ec
em
be
r
31
, 2
00
1
th
ro

u
gh
2
00
8)
20
01
20
02
20
03
20
04
P
ro
je
ct
ed

20
05
a
P
ro
je
ct
ed
20
06
a
P
ro
je
ct
ed
20
07
a
P
ro

je
ct
ed
20
08
a
S
te
ad
y
S
ta
te
b
R
e
ve
n
u

e
--
--
$
2
4
,0
0
0
$
5
9
,2
0
0
$
8
1
,2
0
0

$
1
0
3
,2
0
0
$
1
0
3
,2
0
0
$
1
0
3
,2
0
0
$
1
0

3
,2
0
0
L
a
b
o
r
E
xp
e
n
se
--
--
3
2
,2
5
0

3
2
,2
5
0
3
2
,2
5
0
3
2
,2
5
0
3
2
,2
5
0
3
2
,2

5
0
3
2
,2
5
0
G
ro
ss
M
a
rg
in
--
--
(8
,2
5
0

)
2
6
,9
5
0
4
8
,9
5
0
7
0
,9
5
0
7
0
,9
5
0
7
0

,9
5
0
7
0
,9
5
0
L
e
ss
:
D
e
p
re
ci
a
tio
n

--
--
2
1
,0
6
0
3
7
,9
0
8
3
0
,3
2
6
2
4
,2
6

1
1
9
,4
1
7
1
5
,5
2
1
--
In
te
re
st
c
$
2
6
,0

0
0
$
2
5
,3
3
0
2
4
,6
1
7
2
3
,8
5
8
2
3
,0
4
9

2
2
,1
8
7
2
1
,2
7
0
2
0
,2
9
3
--
S
G
&
A
2

,1
0
0
2
,1
0
0
2
,1
0
0
2
,1
0
0
2
,1
0
0
2
,1

0
0
2
,1
0
0
2
,1
0
0
2
,1
0
0
T
a
xa
b
le
I
n
co

m
e
(L
o
ss
)
(2
8
,1
0
0
)
(2
7
,4
3
0
)
(5
6
,0
2
7
)
(3
6

,9
1
6
)
(6
,5
2
5
)
2
2
,4
0
2
2
8
,1
6
3
3
3
,0
3
6

6
8
,8
5
0
L
e
ss
:
T
a
x
P
a
ya
b
le
b
e
fo
re
N
O
L
@

4
0
%
--
--
--
--
--
8
,9
6
1
1
1
,2
6
5

1
3
,2
1
5
2
7
,5
4
0
T
a
x
im
p
a
ct
o
f
N
O
L
C
a
rr

yf
o
rw
a
rd
d
--
--
--
--
--
(8
,9
6
1
)
(1
1
,2

6
5
)
(1
3
,2
1
5
)
--
N
e
t
T
a
x
B
a
si
s
In

co
m
e
(
L
o
ss
)
$
(2
8
,1
0
0
)
$
(2
7
,4
3
0
)
$
(5
6
,0

2
7
)
$
(3
6
,9
1
6
)
$
(6
,5
2
5
)
$
2
2
,4
0
2
$
2
8

,1
6
3
$
3
3
,0
3
6
$
4
1
,3
1
0
a “
P
ro
je
ct

ed
”
co
lu
m
n
s
re
p
re
se
n
t
O
b
ad
ia
h
V
in
ey
ar
d
’s

p
ro
je
ct
io
n
s
w
it
h
o
u
t
th
e
n
ew
p
la
n
ti
n
g
.

b
“S
te
ad
y
s
ta
te
”
co
lu
m
n
r
ep
re
se
n
ts
t
h
e
fu
ll

y
m
at
u
re
v
in
ey
ar
d
a
ft
er
t
h
e
in
it
ia
l l
o
an
i
s

re
p
ai
d
i
n
2
02
1.
c
A
m
o
u
n
ts
f
ro
m
E
xh
ib
it

6
.
d
A
m
o
u
n
ts
e
q
u
al
t
h
e
re
d
u
ct
io
n
o
f

th
e
N
et
O
p
er
at
in
g
L
o
ss
(
N
O
L
)
fr
o
m
E
xh
ib

it
4
t
im
es
4
0%
t
ax
r
at
e
(e
.g
.,
$2
2,
40
2
x
40
%
=
$

8,
96
1)
.
Aug 2019
to Nov 2019.
10
7-
03
5
-
8-
E
xh
ib
it

3
(
co
n
ti
n
u
ed
)
B
a
la
n
ce
S
h
ee
t—
T
a
x
B
a

si
s:
I
n
it
ia
l
12
.9
A
cr
es
(
a
s
o
f
th
e
y
ea
rs
e
n

d
ed
D
ec
em
be
r
31
, 2
00
1
th
ro
u
gh
2
00
8)
20
01
20
02

20
03
20
04
P
ro
je
ct
ed
20
05
a
P
ro
je
ct
ed
20
06

a
P
ro
je
ct
ed
20
07
a
P
ro
je
ct
ed
20
08
a
C

a
sh
$
2
3
3
,2
4
7
$
1
6
2
,5
9
5
$
9
4
,3
4
2
$

5
1
,2
1
0
$
4
1
,9
5
7
$
5
4
,7
0
5
$
8
7
,2
5
2
$

1
1
9
,8
0
0
A
cc
o
u
n
ts
R
e
ce
iv
a
b
le
--
--
2
1

,6
0
0
5
3
,2
8
0
7
3
,0
8
0
9
2
,8
8
0
9
2
,8
8
0

9
2
,8
8
0
T
o
ta
l C
u
rr
e
n
t
A
ss
e
ts
2
3
3
,2
4
7

1
6
2
,5
9
5
1
1
5
,9
4
2
1
0
4
,4
9
0
1
1
5
,0
3
7

1
4
7
,5
8
5
1
8
0
,1
3
2
2
1
2
,6
8
0
P
ro
p
e
rt

y,
P
la
n
t
&
E
q
u
ip
m
e
n
t
V
in
e
s
&
T
re
lli

s
1
7
8
,3
5
0
2
1
0
,6
0
0
2
1
0
,6
0
0
2
1
0
,6
0
0

2
1
0
,6
0
0
2
1
0
,6
0
0
2
1
0
,6
0
0
2
1
0
,6
0
0

L
e
ss
:
A
cc
u
m
u
la
te
d
D
e
p
re
ci
a
tio
n
--
--

(2
1
,0
6
0
)
(5
8
,9
6
8
)
(8
9
,2
9
4
)
(1
1
3
,5
5
6
)
(1
3
2

,9
7
3
)
(1
4
8
,4
9
4
)
L
a
n
d
4
0
0
,0
0
0
4
0
0
,0

0
0
4
0
0
,0
0
0
4
0
0
,0
0
0
4
0
0
,0
0
0
4
0
0
,0

0
0
4
0
0
,0
0
0
4
0
0
,0
0
0
T
o
ta
l A
ss
e
ts
$
8
1

1
,5
9
7
$
7
7
3
,1
9
5
$
7
0
5
,4
8
2
$
6
5
6
,1

2
2
$
6
3
6
,3
4
3
$
6
4
4
,6
2
9
$
6
5
7
,7
5
9

$
6
7
4
,7
8
5
S
e
cu
re
d
L
o
n
g
-t
e
rm
D

e
b
t
b
3
8
9
,6
9
7
3
7
8
,7
2
5
3
6
7
,0
4
0
3
5

4
,5
9
5
3
4
1
,3
4
1
3
2
7
,2
2
6
3
1
2
,1
9
3
2
9

6
,1
8
3
C
o
m
m
o
n
S
to
ck
4
5
0
,0
0
0
4
5
0
,0
0
0

4
5
0
,0
0
0
4
5
0
,0
0
0
4
5
0
,0
0
0
4
5
0
,0
0
0

4
5
0
,0
0
0
4
5
0
,0
0
0
A
cc
u
m
u
la
te
d
D
e
fic

it
(2
8
,1
0
0
)
(5
5
,5
3
0
)
(1
1
1
,5
5
7
)
(1
4
8
,4
7
3
)

(1
5
4
,9
9
8
)
(1
3
2
,5
9
6
)
(1
0
4
,4
3
3
)
(7
1
,3
9
7
)
T

o
ta
l L
ia
b
ili
tie
s
a
n
d
E
q
u
ity
$
8
1
1
,5
9
7
$
7

7
3
,1
9
5
$
7
0
5
,4
8
2
$
6
5
6
,1
2
2
$
6
3
6

,3
4
3
$
6
4
4
,6
2
9
$
6
5
7
,7
5
9
$
6
7
4
,7
8

5
So
u
rc
e:
C
as
ew
ri
te
r
d
ev
el
o
p
ed
f
ro

m
c
o
m
p
an
y
in
fo
rm
at
io
n
.
a “
P
ro
je
ct
ed
”
co
lu
m

n
s
re
p
re
se
n
t
O
b
ad
ia
h
V
in
ey
ar
d
’s
p
ro
je
ct
io

n
s
w
it
h
o
u
t
th
e
n
ew
p
la
n
ti
n
g
.
b
A
m
o

u
n
ts
f
ro
m
E
xh
ib
it
6
.
Aug 2019
to Nov 2019.
9
Exhibit 4 Obadiah Vineyard Net Operating Loss (NOL)
Schedule

Projected NOL Existing Planting (12.9 acres) Projected NOL
with New Planting (38 acres)
Year
Projected Taxable
Profit or Loss
Cumulative
NOL
Projected Taxable
Profit or Loss
Cumulative
NOL
2001 $(28,100) $(28,100) $(28,100) $(28,100)
2002 (27,430) (55,530) (27,430) (55,530)
2003 (56,027) (111,557) (56,027) (111,557)
2004 (36,916) (148,473) (36,916) (148,473)
2005 (6,525) (154,998) (20,650) (169,123)
2006 22,402 (132,596) 8,675 (160,448)
2007 28,163 (104,433) (57,682) (218,130)
2008 33,036 (71,397) (26,516) (244,646)
2009 35,804 (35,593) 41,890 (202,756)
2010 36,912 -- 105,230 (97,526)

2011 38,071 -- 117,883 --
Exhibit 5 Obadiah Vineyard Deferred Tax Asset Schedule:
Initial 12.9 Acres
Year Cumulative NOL Tax Rate Deferred Tax Asset
Change in
Deferred Tax Asset
2001 $(28,100) 40% $11,240 $11,240
2002 (55,530) 40% 22,212 10,972
2003 (111,557) 40% 44,623 22,411
2004 (148,473) 40% 59,389 14,766
Projected (without new planting):
2005 (154,998) 40% 61,999 2,610
2006 (132,596) 40% 53,039 (8,961)
2007 (104,433) 40% 41,773 (11,265)
2008 (71,397) 40% 28,559 (13,215)
2009 (35,593) 40% 14,237 (14,322)
2010 -- 40% -- (14,237)

Aug 2019
to Nov 2019.
10
7-
03
5
-
10
-
E
xh
ib
it
6
O

b
ad
ia
h
V
in
ey
ar
d
L
o
an
S
ch
ed
u
le
s
B
an
k
T
er
m

s
fo
r
In
it
ia
l
L
o
an
(
p
u
rc
h
as
e
v
in
ey
ar
d
)
E

st
im
at
ed
B
an
k
T
er
m
s
fo
r
N
ew
P
la
n
ti
n
g
(
p
la

n
t
25
.1
a
cr
es
)
L
oa
n
A
m
ou
n
t:
$4
00
,0
00
L
oa

n
A
m
ou
n
t:
$2
50
,0
00
In
te
re
st
R
at
e
6.
50
%
In

te
re
st
R
at
e
5.
65
%
T
er
m
o
f
L
oa
n
20
y
ea
rs
T

er
m
o
f
L
oa
n
20
y
ea
rs
Y
ea
r
P
ay
m
en
t
A
m
o
u

n
t
P
ri
n
ci
p
al
P
ay
m
en
t
In
te
re
st
P
ay
m
en
t

E
n
d
in
g
P
ri
n
ci
p
al
B
al
an
ce
Y
ea
r
P
ay
m

en
t
A
m
o
u
n
t
P
ri
n
ci
p
al
P
ay
m
en
t
In
te
re
st

P
ay
m
en
t
E
n
d
in
g
P
ri
n
ci
p
al
B
al
an
ce

2
0
0
1
$
3
6
,3
0
3
$
1
0
,3
0
3
$
2

6
,0
0
0
$
3
8
9
,6
9
7
2
0
0
5
$
2
1
,1
8
1
$

7
,0
5
6
$
1
4
,1
2
5
$
2
4
2
,9
4
4
2
0
0
2
3
6

,3
0
3
1
0
,9
7
2
2
5
,3
3
0
3
7
8
,7
2
5
2

0
0
6
2
1
,1
8
1
7
,4
5
5
1
3
,7
2
6
2
3
5
,4
8

9
2
0
0
3
3
6
,3
0
3
1
1
,6
8
5
2
4
,6
1
7

3
6
7
,0
4
0
2
0
0
7
2
1
,1
8
1
7
,8
7
6
1
3

,3
0
5
2
2
7
,6
1
4
2
0
0
4
3
6
,3
0
3
1
2
,4

4
5
2
3
,8
5
8
3
5
4
,5
9
5
2
0
0
8
2
1
,1
8
1

8
,3
2
1
1
2
,8
6
0
2
1
9
,2
9
3
2
0
0
5
3
6

,3
0
3
1
3
,2
5
4
2
3
,0
4
9
3
4
1
,3
4
1
2

0
0
9
2
1
,1
8
1
8
,7
9
1
1
2
,3
9
0
2
1
0
,5
0

2
2
0
0
6
3
6
,3
0
3
1
4
,1
1
5
2
2
,1
8
7

3
2
7
,2
2
6
2
0
1
0
2
1
,1
8
1
9
,2
8
8
1
1

,8
9
3
2
0
1
,2
1
4
2
0
0
7
3
6
,3
0
3
1
5
,0

3
3
2
1
,2
7
0
3
1
2
,1
9
3
2
0
1
1
2
1
,1
8
1

9
,8
1
2
1
1
,3
6
9
1
9
1
,4
0
2
2
0
0
8
3
6

,3
0
3
1
6
,0
1
0
2
0
,2
9
3
2
9
6
,1
8
3
2

0
1
2
2
1
,1
8
1
1
0
,3
6
7
1
0
,8
1
4
1
8
1
,0
3

5
2
0
0
9
3
6
,3
0
3
1
7
,0
5
1
1
9
,2
5
2

2
7
9
,1
3
2
2
0
1
3
2
1
,1
8
1
1
0
,9
5
2
1
0

,2
2
8
1
7
0
,0
8
3
2
0
1
0
3
6
,3
0
3
1
8
,1

5
9
1
8
,1
4
4
2
6
0
,9
7
3
2
0
1
4
2
1
,1
8
1

1
1
,5
7
1
9
,6
1
0
1
5
8
,5
1
2
2
0
1
1
3
6
,3

0
3
1
9
,3
3
9
1
6
,9
6
3
2
4
1
,6
3
4
2
0
1

5
2
1
,1
8
1
1
2
,2
2
5
8
,9
5
6
1
4
6
,2
8
7
2

0
1
2
3
6
,3
0
3
2
0
,5
9
6
1
5
,7
0
6
2
2
1

,0
3
7
2
0
1
6
2
1
,1
8
1
1
2
,9
1
6
8
,2
6
5

1
3
3
,3
7
1
2
0
1
3
3
6
,3
0
3
2
1
,9
3
5
1

4
,3
6
7
1
9
9
,1
0
2
2
0
1
7
2
1
,1
8
1
1
3
,6
4

5
7
,5
3
5
1
1
9
,7
2
5
2
0
1
4
3
6
,3
0
3

2
3
,3
6
1
1
2
,9
4
2
1
7
5
,7
4
1
2
0
1
8
2
1
,1

8
1
1
4
,4
1
6
6
,7
6
4
1
0
5
,3
0
9
2
0
1
5

3
6
,3
0
3
2
4
,8
7
9
1
1
,4
2
3
1
5
0
,8
6
2

2
0
1
9
2
1
,1
8
1
1
5
,2
3
1
5
,9
5
0
9
0
,0
7
8

2
0
1
6
3
6
,3
0
3
2
6
,4
9
7
9
,8
0
6

1
2
4
,3
6
5
2
0
2
0
2
1
,1
8
1
1
6
,0
9
2
5
,0
8

9
7
3
,9
8
6
2
0
1
7
3
6
,3
0
3
2
8
,2
1
9

8
,0
8
4
9
6
,1
4
6
2
0
2
1
2
1
,1
8
1
1
7
,0

0
1
4
,1
8
0
5
6
,9
8
6
2
0
1
8
3
6
,3
0
3

3
0
,0
5
3
6
,2
5
0
6
6
,0
9
3
2
0
2
2
2
1
,1

8
1
1
7
,9
6
1
3
,2
2
0
3
9
,0
2
4
2
0
1
9
3
6

,3
0
3
3
2
,0
0
6
4
,2
9
6
3
4
,0
8
7
2
0
2

3
2
1
,1
8
1
1
8
,9
7
6
2
,2
0
5
2
0
,0
4
8
2

0
2
0
3
6
,3
0
3
3
4
,0
8
7
2
,2
1
6
--

2
0
2
4
2
1
,1
8
1
2
0
,0
4
8
1
,1
3
3
--

So
u
rc
e:
C
as
ew
ri
te
r
d
ev
el
o
p
ed
f
ro
m
c
o
m

p
an
y
in
fo
rm
at
io
n
.
Aug 2019
to Nov 2019.
10
7-
03
5
-
11

-
E
xh
ib
it
7
O
b
ad
ia
h
V
in
ey
ar
d
G
A
A
P
-B
as
is

m
e
S
ta
te
m
en
t—
G
A
A
P
B
a
si
s:
I
n
ti
a
l
12
.9
A

cr
es
(
fo
r
th
e
y
ea
rs
e
n
d
ed
D
ec
em
be
r
31
, 2
00
1
th

ro
u
gh
2
00
8)
20
01
20
02
20
03
20
04
P
ro
je
ct
ed

je
ct
ed
20
08
a
S
te
ad
y
S
ta
te
b
R
e
ve
n

u
e
--
--
$
2
4
,0
0
0
$
5
9
,2
0
0
$
8
1
,2
0
0

$
1
0
3
,2
0
0
$
1
0
3
,2
0
0
$
1
0
3
,2
0
0
$
1

0
3
,2
0
0
L
a
b
o
r
E
xp
e
n
se
--
--
3
2
,2
5
0

3
2
,2
5
0
3
2
,2
5
0
3
2
,2
5
0
3
2
,2
5
0
3
2

,2
5
0
3
2
,2
5
0
G
ro
ss
M
a
rg
in
--
--
(8
,2
5

0
)
2
6
,9
5
0
4
8
,9
5
0
7
0
,9
5
0
7
0
,9
5
0
7

0
,9
5
0
7
0
,9
5
0
L
e
ss
:
D
e
p
re
ci
a
tio
n

--
--
4
,2
1
2
4
,2
1
2
4
,2
1
2
4
,2
1
2

4
,2
1
2
4
,2
1
2
4
,2
1
2
In
te
re
st
$
2
6
,0
0
0

$
2
5
,3
3
0
2
4
,6
1
7
2
3
,8
5
8
2
3
,0
4
9
2
2

,1
8
7
2
1
,2
7
0
2
0
,2
9
3
--
S
G
&
A
2
,1
0

0
2
,1
0
0
2
,1
0
0
2
,1
0
0
2
,1
0
0
2
,1
0
0

2
,1
0
0
2
,1
0
0
2
,1
0
0
In
co
m
e
(L
o
ss
)
B

e
fo
re
T
a
x
(2
8
,1
0
0
)
(2
7
,4
3
0
)
(3
9
,1
7
9
)
(3
,2

2
0
)
1
9
,5
8
9
4
2
,4
5
1
4
3
,3
6
8
4
4
,3
4
5

6
4
,6
3
8
L
e
ss
:
T
a
x
E
xp
e
n
se
(
B
e
n
e
fit
)
(1

1
,2
4
0
)
(1
0
,9
7
2
)
(1
5
,6
7
2
)
(1
,2
8
8
)
7
,8
3
6

1
6
,9
8
0
1
7
,3
4
7
1
7
,7
3
8
2
5
,8
5
5

N
e
t
In
co
m
e
(
L
o
ss
)
$
(1
6
,8
6
0
)
$
(1
6
,4
5
8

)
$
(2
3
,5
0
7
)
$
(1
,9
3
2
)
$
1
1
,7
5
4
$
2
5
,4
7

1
$
2
6
,0
2
1
$
2
6
,6
0
7
$
3
8
,7
8
3
a “

P
ro
je
ct
ed
”
co
lu
m
n
s
re
p
re
se
n
t
O
b
ad
ia
h
V
in

ey
ar
d
’s
p
ro
je
ct
io
n
s
w
it
h
o
u
t
th
e
n
ew
p
la
n

ti
n
g
.
b
“S
te
ad
y
s
ta
te
”
co
lu
m
n
r
ep
re
se
n
ts
t

h
e
fu
ll
y
m
at
u
re
v
in
ey
ar
d
a
ft
er
t
h
e
in
it
ia
l l

o
an
i
s
re
p
ai
d
i
n
2
02
1,
f
o
r
th
e
re
m
ai
n
in
g

e
st
im
at
ed
u
se
fu
l l
if
e
o
f
v
in
es
.
Aug 2019
to Nov 2019.

10
7-
03
5
-
12
-
E
xh
ib
it
7
(
co
n
ti
n
u
ed
)
B

a
la
n
ce
S
h
ee
t—
G
A
A
P
B
a
si
s:
I
n
ti
a
l
12
.9
A

cr
es
(
a
s
o
f
th
e
y
ea
rs
e
n
d
ed
D
ec
em
be
r
31
, 2
00

1
th
ro
u
gh
2
00
8)
20
01
20
02
20
03
20
04
P
ro

je
ct
ed
20
05
a
P
ro
je
ct
ed
20
06
a
P
ro
je
ct
ed
20
07

a
P
ro
je
ct
ed
20
08
a
C
a
sh
$
2
3
3
,2
4
7

$
1
6
2
,5
9
5
$
9
4
,3
4
2
$
5
1
,2
1
0
$
4
1
,9
5

7
$
5
4
,7
0
5
$
8
7
,2
5
2
$
1
1
9
,8
0
0
A
cc
o

u
n
ts
R
e
ce
iv
a
b
le
--
--
2
1
,6
0
0
5
3
,2
8
0

7
3
,0
8
0
9
2
,8
8
0
9
2
,8
8
0
9
2
,8
8
0
T
o
ta

l C
u
rr
e
n
t
A
ss
e
ts
2
3
3
,2
4
7
1
6
2
,5
9
5
1
1
5

,9
4
2
1
0
4
,4
9
0
1
1
5
,0
3
7
1
4
7
,5
8
5
1
8
0

,1
3
2
2
1
2
,6
8
0
P
ro
p
e
rt
y,
P
la
n
t
&
E
q
u
ip

m
e
n
t
V
in
e
s
&
T
re
lli
s
1
7
8
,3
5
0
2
1
0
,6

0
0
2
1
0
,6
0
0
2
1
0
,6
0
0
2
1
0
,6
0
0
2
1
0
,6

0
0
2
1
0
,6
0
0
2
1
0
,6
0
0
L
e
ss
:
A
cc
u
m
u
la

te
d
D
e
p
re
ci
a
tio
n
--
--
(4
,2
1
2
)
(8
,4
2
4
)

(1
2
,6
3
6
)
(1
6
,8
4
8
)
(2
1
,0
6
0
)
(2
5
,2
7
2
)
L
a
n

d
4
0
0
,0
0
0
4
0
0
,0
0
0
4
0
0
,0
0
0
4
0
0
,0
0

0
4
0
0
,0
0
0
4
0
0
,0
0
0
4
0
0
,0
0
0
4
0
0
,0
0

0
D
e
fe
rr
e
d
T
a
x
A
ss
e
t
1
1
,2
4
0
2
2
,2
1
2

4
4
,6
2
3
5
9
,3
8
9
6
1
,9
9
9
5
3
,0
3
9
4
1
,7

7
3
2
8
,5
5
9
T
o
ta
l A
ss
e
ts
$
8
2
2
,8
3
7
$

7
9
5
,4
0
7
$
7
6
6
,9
5
3
$
7
6
6
,0
5
5
$
7
7

5
,0
0
0
$
7
9
4
,3
7
5
$
8
1
1
,4
4
5
$
8
2
6
,5

6
6
D
e
fe
rr
e
d
T
a
x
L
ia
b
ili
ty
--
--

6
,7
3
9
2
0
,2
1
8
3
0
,6
6
3
3
8
,6
8
3
4
4
,7

6
5
4
9
,2
8
9
S
e
cu
re
d
L
o
n
g
-t
e
rm
D
e
b
t
3
8

9
,6
9
7
3
7
8
,7
2
5
3
6
7
,0
4
0
3
5
4
,5
9
5
3
4

1
,3
4
1
3
2
7
,2
2
6
3
1
2
,1
9
3
2
9
6
,1
8
3
T
o

ta
l L
ia
b
ili
tie
s
3
8
9
,6
9
7
3
7
8
,7
2
5
3
7
3
,7
7
9

3
7
4
,8
1
2
3
7
2
,0
0
4
3
6
5
,9
0
9
3
5
6
,9
5
8

3
4
5
,4
7
1
C
o
m
m
o
n
S
to
ck
4
5
0
,0
0
0
4
5
0

,0
0
0
4
5
0
,0
0
0
4
5
0
,0
0
0
4
5
0
,0
0
0
4
5
0

,0
0
0
4
5
0
,0
0
0
4
5
0
,0
0
0
R
e
ta
in
e
d
E
a
rn

in
g
s
(A
cc
u
m
u
la
te
d
D
e
fic
it)
(1
6
,8
6
0
)
(3
3
,3
1

8
)
(5
6
,8
2
6
)
(5
8
,7
5
7
)
(4
7
,0
0
4
)
(2
1
,5
3
3
)
4

,4
8
8
3
1
,0
9
5
T
o
ta
l L
ia
b
ili
tie
s
a
n
d
E
q
u
ity

$
8
2
2
,8
3
7
$
7
9
5
,4
0
7
$
7
6
6
,9
5
3
$

7
6
6
,0
5
5
$
7
7
5
,0
0
0
$
7
9
4
,3
7
5
$
8
1

1
,4
4
5
$
8
2
6
,5
6
6
a “
P
ro
je
ct
ed
”
co
lu

m
n
s
re
p
re
se
n
t
O
b
ad
ia
h
V
in
ey
ar
d
’s
p
ro
je
ct

io
n
s
w
it
h
o
u
t
th
e
n
ew
p
la
n
ti
n
g
.

Aug 2019
to Nov 2019.
10
7-
03
5
-
13
-
E
xh
ib
it
7
(
co
n
ti
n
u
ed

)
S
ta
te
m
en
t
o
f
C
a
sh
F
lo
w
s—
G
A
A
P
B
a
si

s:
I
n
ti
a
l
12
.9
A
cr
es
(
fo
r
th
e
y
ea
rs
e
n
d
ed
D

ec
em
be
r
31
, 2
00
1
th
ro
u
gh
2
00
8)
20
01
20
02
20

03
20
04
P
ro
je
ct
ed
20
05
a
P
ro
je
ct
ed
20
06
a
P

ro
je
ct
ed
20
07
a
P
ro
je
ct
ed
20
08
a
C
A
S
H

F
L
O
W
F
R
O
M
O
P
E
R
A
T
IN
G
A
C
T
IV
IT
IE
S

C
a
sh
r
e
ce
iv
e
d
f
ro
m
c
u
st
o
m
e
rs
$-
-
$-

-
$2
,4
00
$2
7,
52
0
$6
1,
40
0
$8
3,
40
0
$1
03
,2
00
$1
03

,2
00
F
a
rm
in
g
c
o
st
s
--
--
(3
2,
25
0)
(3
2,
25

0)
(3
2,
25
0)
(3
2,
25
0)
(3
2,
25
0)
(3
2,
25
0)
In
te

re
st
c
o
st
s
(2
6,
00
0)
(2
5,
33
0)
(2
4,
61
7)
(2
3,
85

8)
(2
3,
04
9)
(2
2,
18
7)
(2
1,
27
0)
(2
0,
29
3)
S
G

&
A
c
o
st
s
(2
,1
00
)
(2
,1
00
)
(2
,1
00
)
(2
,1
00
)
(2
,1

00
)
(2
,1
00
)
(2
,1
00
)
(2
,1
00
)
N
e
t
ca
sh
p
ro
vi
d
e
d

(
co
n
su
m
e
d
)
b
y
o
p
e
ra
tin
g
a
ct
iv
iti
e
s
(2
8,
10

0)
(2
7,
43
0)
(5
6,
56
7)
(3
0,
68
8)
4,
00
1
26
,8
63

47
,5
80
48
,5
57
IN
V
E
S
T
IN
G
A
C
T
IV
IT
IE
S

P
la
n
t
&
T
re
lli
s
V
in
e
s
(1
78
,3
50
)
(3
2,
25

0)
--
--
--
--
--
--
N
e
t
ca
sh
c
o
n
su
m
e

d
b
y
in
ve
st
in
g
a
ct
iv
iti
e
s
(1
78
,3
50
)
(3
2,
25
0)
--

--
--
--
--
--
F
IN
A
N
C
IN
G
A
C

T
IV
IT
IE
S
R
e
p
a
ym
e
n
ts
o
f
vi
n
e
ya
rd
m
o
rt

g
a
g
e
(1
0,
30
3)
(1
0,
97
2)
(1
1,
68
5)
(1
2,
44
5)

(1
3,
25
4)
(1
4,
11
5)
(1
5,
03
3)
(1
6,
01
0)
N
e
t

ca
sh
c
o
n
su
m
e
d
b
y
fin
a
n
ci
n
g
a
ct
iv
iti
e
s
(1
0,
30
3)

(1
0,
97
2)
(1
1,
68
5)
(1
2,
44
5)
(1
3,
25
4)
(1
4,
11

5)
(1
5,
03
3)
(1
6,
01
0)
N
e
t
in
cr
e
a
se

(
d
e
cr
e
a
se
)
in
c
a
sh
(2
16
,7
53
)
(7
0,
65
3)
(6
8,

25
3)
(4
3,
13
3)
(9
,2
53
)
12
,7
47
32
,5
47
32
,5
47

C
a
sh
a
t
b
e
g
in
n
in
g
o
f
ye
a
r
45
0,
00
0
23
3,
24

7
16
2,
59
5
94
,3
42
51
,2
10
41
,9
57
54
,7
05
87
,2
52

C
a
sh
a
t
e
n
d
o
f
ye
a
r
$2
33
,2
47
$1
62
,5
95

$9
4,
34
2
$5
1,
21
0
$4
1,
95
7
$5
4,
70
5
$8
7,
25
2
$1
19
,8
00

R
e
c
o
n
c
il
ia
ti
o
n
t
o
N
e
t
In
c
o
m
e
(
L

o
s
s
):
N
e
t
in
co
m
e
(
lo
ss
)
$(
16
,8
60
)
$(

16
,4
58
)
$(
23
,5
07
)
$(
1,
93
2)
$1
1,
75
4
$2
5,
47
1
$2
6,

02
1
$2
6,
60
7
R
e
co
n
ci
lin
g
a
d
ju
st
m
e
n
ts
:

D
e
p
re
ci
a
tio
n
--
--
4,
21
2
4,
21
2
4,
21
2
4,

21
2
4,
21
2
4,
21
2
D
e
fe
rr
e
d
in
co
m
e
t
a
xe
s
(1
1,
24

0)
(1
0,
97
2)
(1
5,
67
2)
(1
,2
88
)
7,
83
6
16
,9
80
17

,3
47
17
,7
38
C
h
a
n
g
e
in
A
/R
--
--
(2
1,
60
0)

(3
1,
68
0)
(1
9,
80
0)
(1
9,
80
0)
--
--
N
e

t
ca
sh
p
ro
vi
d
e
d
(
co
n
su
m
e
d
)
b
y
o
p
e
ra
tin
g
a

ct
iv
iti
e
s
$(
28
,1
00
)
$(
27
,4
30
)
$(
56
,5
67
)
$(
30
,6
88

)
$4
,0
01
$2
6,
86
3
$4
7,
58
0
$4
8,
55
7
So
u
rc
e:

C
as
ew
ri
te
r
d
ev
el
o
p
ed
f
ro
m
c
o
m
p
an
y
in
fo

rm
at
io
n
.
a “
P
ro
je
ct
ed
”
co
lu
m
n
s
re
p
re
se
n
t
O

b
ad
ia
h
V
in
ey
ar
d
’s
p
ro
je
ct
io
n
s
w
it
h
o
u
t
th

e
n
ew
p
la
n
ti
n
g
.
Aug 2019
to Nov 2019.
ACC 423: Deferred Tax Case Questions
Fall A Quarter - 2019
Carefully read the case Deferred Taxes at Obadiah Vineyard.
Prepare answers for the following questions:
1. (2 points) Using the information provided in the case, prepare
the projected tax basis income statement and projected balance
sheet with the new planting for 2005 through 2008. (Note: The
loan is taken out for the new planting on January 1, 2005 and
assume the new vines along with crop insurance are put into
production on January 1, 2007.)

2. (2 points) Now prepare the income statement and balance
sheet for 2005-2008 for the US GAAP financials with the new
planting.
3. (2 points) Assume that you are a potential lender to this
business (i.e., you are a bank considering a loan). What are the
two primary differences between the tax and GAAP financial
statements in parts 1 and 2 (above)? For these two accounts,
which treatment appears more useful to you in making your loan
decision? Support your answer.
4. (1 point) Assume now that the firm estimates an expected
useful life for the new planting of 5 years instead of 50 years.
How will this change to the useful life affect the US GAAP
balance sheet in 2007 and 2008? Please calculate and present
any numbers that will change from your answer in part 2.
5. (2 points) Assume now that the firm goes ahead with the new
planting (with the original useful life of 50 years). In 2007, the
tax rate changes unexpectedly to a 50% corporate rate. For 2007
and 2008 information only, how will this change the US GAAP
financials? Please calculate and present any numbers that will
change from your answer in part 2.
6. (1 point) In your own words, how do you interpret the effect
of the tax rate change in part (5) on current period net income?
Said another way, how would you explain the change in net
income to someone unfamiliar with deferred tax accounting?
Tax InfoObadiah Vineyard: Tax-basis Income

StatementProjected WITHOUT new plantingPart 1: WITH new
plantingMACRS
Rate200120022003200420052006200720082005200620072008
YearRateRevenue0024,00059,20081,200103,200103,200103,200
110.00%Labor
Expense0032,25032,25032,25032,25032,25032,250218.00%Gro
ss
Margin00(8,250)26,95048,95070,95070,95070,950314.40%less:
411.52%Depreciation0021,06037,90830,32624,26119,41715,521
59.22%Interest
Expense26,00025,33024,61723,85823,04922,18721,27020,2936
7.37%SG&A2,1002,1002,1002,1002,1002,1002,1002,10076.55
%Taxable Income
(Loss)(28,100)(27,430)(56,027)(36,916)(6,525)22,40228,16333,
03686.55%less: Tax Payable before NOL @
40%000008,96111,26513,21496.56%Tax Impact of NOL
Carryforward00000(8,961)(11,265)(13,214)106.55%Net Tax
Basis Income
(Loss)(28,100)(27,430)(56,027)(36,916)(6,525)22,40228,16333,
036Obadiah Vineyard: Tax-basis Balance SheetProjected
WITHOUT new plantingPart 1: WITH new
planting2001200220032004200520062007200820052006200720
08Cash233,247162,59594,34251,21041,95754,70587,252119,80
0Accounts
Receivable0021,60053,28073,08092,88092,88092,880Total
Current
Assets233,247162,595115,942104,490115,037147,585180,1322
12,680Property, Plant, and EquipmentVines and
Trellises178,350210,600210,600210,600210,600210,600210,600
210,600less: Accumulated
Depreciation00(21,060)(58,968)(89,294)(113,556)(132,973)(148
,494)Land400,000400,000400,000400,000400,000400,000400,0
00400,000Total
Assets811,597773,195705,482656,122636,343644,629657,7596
74,786Secured Long-Term
Debt389,697378,725367,040354,595341,341327,226312,193296

,183Common
Stock450,000450,000450,000450,000450,000450,000450,00045
0,000Accumulated
Deficit(28,100)(55,530)(111,557)(148,473)(154,998)(132,596)(
104,433)(71,397)Total Liabilities +
Equity811,597773,195705,483656,122636,343644,630657,7606
74,786
GAAP InfoObadiah Vineyard: US GAAP Income
StatementProjected WITHOUT new plantingPart 2: WITH new
planting2001200220032004200520062007200820052006200720
08Revenue0024,00059,20081,200103,200103,200103,200Labor
Expense0032,25032,25032,25032,25032,25032,250Gross
Margin00(8,250)26,95048,95070,95070,95070,950less:Deprecia
tion004,2124,2124,2124,2124,2124,212Interest
Expense26,00025,33024,61723,85823,04922,18721,27020,293S
G&A2,1002,1002,1002,1002,1002,1002,1002,100Income (Loss)
Before
Tax(28,100)(27,430)(39,179)(3,220)19,58942,45143,36844,345l
ess: Tax Expense
(Benefit)(11,240)(10,972)(15,672)(1,288)7,83616,98017,34717,
738Net Income
(Loss)(16,860)(16,458)(23,507)(1,932)11,75425,47126,02126,6
07Obadiah Vineyard: US GAAP Balance SheetProjected
WITHOUT new plantingPart 2: WITH new
planting2001200220032004200520062007200820052006200720
08Cash233,247162,59594,34251,21041,95754,70587,252119,80
0Accounts
Receivable0021,60053,28073,08092,88092,88092,880Total
Current
Assets233,247162,595115,942104,490115,037147,585180,1322
12,680Property, Plant, and EquipmentVines and
Trellises178,350210,600210,600210,600210,600210,600210,600
210,600less: Accumulated
Depreciation00(4,212)(8,424)(12,636)(16,848)(21,060)(25,272)
Land400,000400,000400,000400,000400,000400,000400,000400
,000Deferred Tax

Asset11,24022,21244,62359,38961,99953,03941,77328,559Tota
l
Assets822,837795,407766,953766,055775,000794,375811,4458
26,566Deferred Tax
Liability006,73920,21830,66338,68344,76549,289Secured
Long-Term
Debt389,697378,725367,040354,595341,341327,226312,193296
,183Total
Liabilities389,697378,725373,779374,813372,004365,909356,9
58345,471Common
Stock450,000450,000450,000450,000450,000450,000450,00045
0,000Retained Earnings (Accumulated
Deficit)(16,860)(33,318)(56,825)(58,757)(47,004)(21,533)4,488
31,095Total Liabilities +
Equity822,837795,407766,954766,056775,000794,375811,4458
26,566

CMIT 451 Course Final Project Paper The Evil .docx

Recommended

Recommended

More Related Content

Similar to CMIT 451 Course Final Project Paper The Evil .docx

Similar to CMIT 451 Course Final Project Paper The Evil .docx (20)

More from mccormicknadine86

More from mccormicknadine86 (20)

Recently uploaded

Recently uploaded (20)

CMIT 451 Course Final Project Paper The Evil .docx