Fallsreach Homeowners Association, Inc. Financial Statements For the Years Ended December 31, 2012 and December 31, 2011
Financial Statements December 31, 2012 and December 31, 2011 Table of Contents Page Independent Auditors Report 1 Financial Statements: Balance Sheets 3 Statements of Revenues and Expenses 4 Statements of Members Equity 5 Statements of Cash Flows 6 Notes to Financial Statements 7 Supplementary Information on Future Major Repairs and Replacements 11
Independent Auditors Report To the Board of Directors of Fallsreach Homeowners Association, Inc. Potomac, Maryland We have audited the accompanying financial statements of Fallsreach Homeowners Association, Inc., which comprise the balance sheets as of December 31, 2012 and December 31, 2011, and the related statements of revenues, expenses, and changes in members equity and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independent Auditors Report December 31, 2012 and December 31, 2011 Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fallsreach Homeowners Association, Inc. as of December 31, 2012 and December 31, 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. We have not applied procedures to determine whether the funds designated for future major repairs and replacements as discussed in Note C are adequate to meet such future costs because that determination is outside the scope of our audit. Our opinion on the financial statements is not modified with respect to this matter. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Supplementary Information on Future Major Repairs and Replacements is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of the Association's management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Olney, MD February 28, 2013
Balance Sheets December 31, 2012 and December 31, 2011 Cash - Operating Cash - Investments (Note E) Assessments Receivable - Net (Note B) Accrued Interest Prepaid Expenses Total Assets ASSETS 2012 2011 $ 53,877 $ 58,701 443,053 442,651 14,705 10,706 111-4,947 4,884 $ 516,693 $ 516,942 LIABILITIES: Accounts Payable Prepaid Assessments Total Liabilities LIABILITIES AND MEMBERS' EQUITY $ 1,532 $ 2,878 696 8,958 $ 2,228 $ 11,836 MEMBERS' EQUITY: General Replacement Reserves (Note C) Townhomes Replacement Reserves (Note C) Unappropriated Members' Equity Total Members' Equity Total Liabilities and Members' Equity $ 357,783 $ 328,568 54,133 82,570 102,549 93,968 $ 514,465 $ 505,106 $ 516,693 $ 516,942 See Accompanying Notes to Financial Statements 3
Statements of Revenues and Expenses For the Years Ended December 31, 2012 and December 31, 2011 INCOME: Assessments Interest Other Total Income 2012 2011 $ 206,269 $ 187,619 919 390 7,174 10,832 $ 214,362 $ 198,841 EXPENSES: Management Legal & Audit Insurance Bad Debt Administrative Street Lights Snow Removal Grounds General Repairs & Maintenance Total Expenses Net Income before Provision for Income Taxes and Contribution to Reserves Provision for Income Taxes (Note D) Contribution to Reserves (Note C) Net Income (Loss) $ 7,420 $ 7,316 7,492 9,406 5,343 4,968 3,426 2,180 7,970 6,655 3,941 3,471 1,362 10,270 123,181 125,049 1,712 3,470 $ 161,847 $ 172,785 $ 52,515 $ 26,056 - - (43,934) (43,937) $ 8,581 $ (17,881) See Accompanying Notes to Financial Statements 4
Statements of Members' Equity For the Years Ended December 31, 2012 and December 31, 2011 General Replacement Reserves Townhomes Replacement Reserves Unappropriated Members' Equity Total Members' Equity Balance as of December 31, 2010 Additions: Contributions to Reserves - Budget Contributions to Reserves - Interest $ 293,140 $ 89,450 $ 111,849 $ 494,439 35,394 8,500 43,894 34 9 43 Deductions: Reserve Expenditure - Asphalt/Seal Net Loss Balance as of December 31, 2011 (15,389) (15,389) (17,881) (17,881) $ 328,568 $ 82,570 $ 93,968 $ 505,106 Additions: Contributions to Reserves - Budget 35,000 8,250 43,250 Contributions to Reserves - Interest 678 6 684 Refund of Deposit 15,389 15,389 Net Income 8,581 8,581 Deductions: Reserve Expenditure - Repaving/Asphalt Reserve Expenditure - Fence Work Reserve Expenditure - Footpath Repair Reserve Expenditure - Bank Fees Balance as of December 31, 2012 See Accompanying Notes to Financial Statements (48,990) (48,990) (3,868) (2,997) (6,865) (2,500) (2,500) (95) (95) (190) $ 357,783 $ 54,133 $ 102,549 $ 514,465 5
Statements of Cash Flows For the Years Ended December 31, 2012 and December 31, 2011 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) $ 8,581 $ (17,881) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Decrease (Increase) in: Assessments Receivable - Net (Note B) Accrued Interest Prepaid Expenses Income Taxes Receivable Increase (Decrease) in: Accounts Payable Prepaid Assessments Net Cash (Used) by Operating Activities (3,999) (1,892) (111) - (63) (227) - 1,200 (1,346) 1,178 (8,262) 8,879 $ (5,200) $ (8,743) CASH FLOWS FROM INVESTING ACTIVITIES: Received from Assessments (Reserves) Received from Interest (Reserves) Refund of Deposit Disbursed for Expenditures (Reserves) Net Decrease (Increase) in Non Cash Equivalents Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 43,250 $ 43,894 684 43 15,389 - (58,545) (15,389) (280,000) - $ (279,222) $ 28,548 $ (284,422) $ 19,805 501,352 481,547 $ 216,930 $ 501,352 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash Paid for Income Taxes $ - $ - See Accompanying Notes to Financial Statements 6
Notes to Financial Statements December 31, 2012 and December 31, 2011 Note A Organization Fallsreach Homeowners Association, Inc. is an association organized under the laws of the State of Maryland for the purpose of operating and maintaining the common property of the Association. The Association consists of 223 single-family homes and 75 townhouse units located in Potomac, Maryland. Note B Summary of Significant Accounting Policies Method of Accounting The financial statements are presented on the accrual method of accounting in which revenues are recognized when earned and expensed when incurred, not necessarily when received or paid. The Association's financial statements are maintained on the cash basis of accounting throughout the year. Property Real property and common areas acquired from the developer and related improvements to such property are not recorded on the Association s financial statements because those properties are owned by the individual homeowners in common and not by the Association. Assessments Receivable Association members are subject to assessments to provide funds for the Association s operating expenses and future major repairs and replacements. Assessments Receivable at the balance sheet date represents fees due from homeowners. The Association utilizes the allowance method of accounting for bad debt. Under the allowance method, collection efforts may continue and recovery of amounts previously written off are recognized as income in the year of collection. 2012 2011 Assessments Receivable $ 28,485 $ 21,060 Less: Allowance for Bad Debt (13,780) (10,354) Assessments Receivable - Net $ 14,705 $ 10,706 Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid investments that mature within three months from the balance sheet date to be cash equivalents. 7
Notes to Financial Statements December 31, 2012 and December 31, 2011 Note C Replacement Reserves In accordance with the Association s governing documents, it is accumulating funds for future major repairs and replacements. Accumulated funds, which aggregate $411,916 and $411,138 at December 31, 2012 and December 31, 2011, respectively, are held in separate accounts and are generally not available for operating purposes. It is the Association's policy that interest earned on such funds is contributed to the replacement reserves. Accordingly, $684 of interest earned has been contributed to replacement reserves. These designated replacement reserves were fully funded by cashinvestments. In 2010, the Association hired a professional engineer to estimate the remaining useful lives and the replacement costs of the components of common property. The estimates were based on current estimated replacement costs. The table included in the unaudited supplementary information on future major repairs and replacements is based on the study. The Association is funding the replacement reserves over the remaining useful lives of the components based on the study s estimates of the replacement costs and considering amounts previously accumulated in the replacement reserves. Accordingly, $43,250 has been included in the current financial statements as a contribution to reserves. The Association is funding for major repairs and replacements based on estimates of future needs. Actual expenditures, however, may vary from the estimated amounts and the variations may be material. Therefore, amounts designated for future repairs and replacements may not be adequate to meet future needs. If additional funds are needed, however, the Association has the right, subject to member approval, to increase regular assessments or levy special assessments, or it may delay major repairs and replacements until funds are available. Note D Income Taxes For income tax purposes, the Association may elect annually to file as an Association classified as a nonexempt membership organization or as a tax-exempt homeowners association. The Association is subject to specific rulings and regulations applicable to nonexempt membership organizations. In general, the Association is required to separate its taxable income and deductions into membership transactions, non-membership transactions and capital transactions. For federal and state tax purposes, the Association is taxed on all net income from nonmembership activities reduced only by losses from non-membership activities for which a profit motive exists. Non-membership income may not be offset by membership losses, and any net membership losses may only be carried forward to offset membership income of future tax periods. Any net membership income not applied to the subsequent tax year is subject to taxation. 8
Notes to Financial Statements December 31, 2012 and December 31, 2011 Note D Income Taxes (Continued) The Association elected to be taxed as an association classified as a tax-exempt homeowners association for both federal and state income tax purposes for the years ended December 31, 2012 and December 31, 2011. This resulted in a provision for income taxes of $0 and $0, respectively. The Association s federal and state income tax returns are generally subject to examination by taxing authorities for three years after the returns are filed. The income tax returns for December 31, 2010, December 31, 2011, and December 31, 2012 remain open to examination. Note E Cash Investments The Association maintains its cash investments as follows: Institution Cash Equivalents: Type of Investment Amount Morgan Stanley Money Market $ 28,562 Morgan Stanley Money Market 84,512 Morgan Stanley Money Market 49,979 Total Cash Equivalents $ 163,053 Non Cash Equivalents: Firstbank Santurce PR Certificate of Deposit $ 140,000 Firstbank Santurce PR Certificate of Deposit 140,000 Total Non Cash Equivalents $ 280,000 Total Cash - Investments $ 443,053 The Association maintains fund balances at various banks. The Federal Deposit Insurance Corporation (FDIC) insures accounts at banks for up to $250,000. Amounts in excess of insured limits as of December 31, 2012 and December 31, 2011 were approximately $30,000 and $0, respectively. Note F Subsequent Events In preparing the financial statements, the Association has evaluated events and transactions for potential recognition or disclosure through February 28, 2013, which is the date the financial statements were available to be issued. 9
Supplementary Information on Future Major Repairs and Replacements December 31, 2012 Unaudited A professional engineer conducted a study in 2010 to estimate the remaining useful lives and the replacement costs of the components of common property. Replacement costs were based on the estimated costs to repair or replace the common property components at the date of the study. Estimated replacement costs have not been revised since that date and do not take into account the effects of inflation between the date of the study and the date the components will require repair or replacement. The Association has not designated the replacement reserve balance of $411,916 into specific categories as detailed below and utilizes the cash flow method of allocating replacement reserves. The following information is based on the study and presents significant information about the components of common property. Component Master Association: Asphalt Components Site Features 2010 Estimated Remaining Useful Life (Years) 2-14 1-45 2010 Estimated Replacement Cost $ 65,520 245,366 Townhomes: Asphalt Components Concrete Components Site Features 5-20 5 3-35 203,331 119,628 115,850 Total $ 749,695 10
February 28, 2013 To the Board of Directors of Fallsreach Homeowners Association, Inc. Potomac, Maryland SAS No. 114 Letter We have audited the financial statements of Fallsreach Homeowners Association, Inc. for the year ended December 31, 2012, and have issued our report thereon dated February 28, 2013. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards As stated in our engagement letter, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your responsibilities. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter and through discussions with management and/or the board of directors. Significant Audit Findings Qualitative Aspects of Accounting Practices Management and the board of directors are responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the Association are described in Note B to the financial statements.
SAS No. 114 Letter December 31, 2012 Page 2 of 3 Qualitative Aspects of Accounting Practices (continued) No new accounting policies were adopted and the application of existing policies was not changed during 2012. We noted no transactions entered into by the Association during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and the board of directors and are based on the Association s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Management s estimate of the allowance for bad debt included in Note B to the financial statements is based on one half of all large outstanding assessments receivable balances as of the audit year end. We evaluated the key factors and assumptions used to develop the allowance for bad debt in determining that it is reasonable in relation to the financial statements taken as a whole. The estimated remaining lives of the components of the common property and their estimated cost of replacement included in the supplementary information. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements was: The disclosure of Future Major Repairs and Replacements in Note C to the financial statements outlining the Association s reserve funding policy, reserve study, and funding status. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management and the board of directors in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The proposed adjusting journal entries have been provided to the Association. The journal entries are material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of the audit.
SAS No. 114 Letter December 31, 2012 Page 3 of 3 Management Representations We have requested certain representations from management and the board of directors that are included in the management representation letter. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the Association s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management and/or the board of directors each year prior to retention as the Association s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the information and use of management, the Board of Directors, and others within the organization, and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, OAO Mohn & Allen, P.C.
February 28, 2013 SAS No. 115 Letter To the Board of Directors And Management Agent, Community Association Services, Inc., of Fallsreach Homeowners Association, Inc. Potomac, Maryland In planning and performing our audit of the financial statements of Fallsreach Homeowners Association, Inc. as of and for the year ended December 31, 2012, in accordance with auditing standards generally accepted in the United States of America, we considered Fallsreach Homeowners Association, Inc. s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Association s internal control. Accordingly, we do not express an opinion on the effectiveness of the Association s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the Association s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. We did not identify any deficiencies in internal control that we consider to be material weaknesses. This communication is intended solely for the information and use of management, the Board of Directors, and others within the Association, and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, OAO Mohn & Allen, P.C.
February 28, 2013 To the Board of Directors of Fallsreach Homeowners Association, Inc. Potomac, Maryland Management Letter In planning and performing our audits of the financial statements of Fallsreach Homeowners Association, Inc. as of and for the years ended December 31, 2012 and December 31, 2011, in accordance with auditing standards generally accepted in the United States of America, we considered the Association s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing an opinion on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the Association s internal control. Accordingly, we do not express an opinion on the effectiveness of the Association s internal control. However, during our audits we became aware of several matters that are opportunities for strengthening internal controls, operating efficiency, and other matters. The points below summarize our comments and suggestions regarding those matters. This letter does not affect our report dated February 28, 2013 on the financial statements of the Association. Reserve Study We commend the Association for conducting a replacement reserve study in 2010. The Association is currently funding its replacement reserves based on this study. We recommend an update be done every 3-5 years. The Board should consider planning to update its replacement reserve study in 2014. Unappropriated Members Equity At year-end, the Association had a balance of $102,549 in unappropriated members equity. This represents 50% of the Association s annual assessments of $206,269. We recommend that the Association maintain 10-20% of the annual assessments in unappropriated members equity to provide for future unexpected expenditures. We recommend the Association consider transferring some of these funds to replacement reserves.
Management Letter December 31, 2012 and December 31, 2011 Page 2 of 2 Assessments Receivable The Association s assessments receivable balance of $28,485 (before deducting the allowance for doubtful accounts of $13,780) represents approximately 14% of annual assessments of $206,269. Assessments receivable, at a level of 5% or less of annual assessments, indicates good collection procedures and does not impact cash flow. We recommend the Association continue to aggressively pursue all delinquent accounts. Uninsured Funds At year-end, the combined balance of the accounts with Firstbank Santurce PR was over the federally insured limit of $250,000 per financial institution. The Association should limit its fund balances in any one financial institution to $250,000. Funds in excess of $250,000 should be immediately transferred to other institutions or Treasury instruments so all Association funds will be insured. Income Taxes For 2012, we recommend the Association file using the tax-exempt homeowners association method. We will review the status of these comments and suggestions during our next audit engagement. We will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This report is intended solely for the information and use of the Board of Directors, management, and others within the organization and is not intended to be, and should not be, used by anyone other than those specified parties. Sincerely, OAO Mohn & Allen, P.C.
Basis: Adjusted Fallsreach HOA FALLSREACH Trial Balance Worksheet Page 1 Dec 31, 2012 Adjustments Adjustments Dec 31, 2012 Account T Description Unadjusted Debit Credit Adjusted Workpaper 1010. 000 A CAB checking 20,356.31 20,356.31 B-1 1010. 010 A CAB (townhouse) Checking 33,521.30 33,521.30 B-2 1010. 120 A SSB (general) Operating 28,562.55 28,562.01 B-3 9 To adjust interest to actual 0.54 1010. 200 A SSB (general) Reserve 364,085.51 364,511.57 B-4 1 To tie in members' equity 430.18 11 To adjust interest to actual 4.12 1010. 300 A Smith Barney TH Reserve 50,075.09 49,979.42 B-5 10 To adjust for interest & bank fees 95.67 1600. 000 A Assessments Receivable 0.00 28,484.87 E-1 1 To tie in members' equity 21,059.57 3 To reverse PY a/r 21,059.57 4 To record CY a/r 28,484.87 1750. 000 A Allowance for Bad Debt 0.00 (13,779.86) E-2 1 To tie in members' equity 10,354.02 5 To adjust allowance for bad debt 3,425.84 1800. 000 A Accrued interest 0.00 110.57 Y-2 13 To record CY accrued interest 110.57 1900. 000 A Prepaid Insurance 0.00 4,946.86 G-1 1 To tie in members' equity 4,884.34 6 To adjust prepaid insurance 62.52 2100. 000 L Accounts Payable 0.00 (1,528.98) N-1 1 To tie in members' equity 2,874.68 7 To reverse 12/11 a/p 2,874.68 8 To record 12/12 a/p 1,528.98 2200. 000 L Prepaid Owner Assessments 0.00 (696.15) E-1 1 To tie in members' equity 8,958.40 2 To reclass prepaid assessments 8,262.25 3200. 000 L Reserve Fund (364,085.51) (357,889.09) R-1 1 To tie in members' equity 6,287.30 12 To adjust reserve interest 4.12 14 To record bank fees as reserve expenditure 95.00 3200. 010 L Reserve Fund Townhouse (50,075.09) (54,133.26) R-1 1 To tie in members' equity 4,058.84 12 To adjust reserve interest 0.67 3600. 000 L Retained Earnings (87,449.61) (93,865.06) PY 1 To tie in members' equity 24,294.98 1 To tie in members' equity 17,879.53 4000. 000 R General Assessment (163,263.50) (164,794.00) Y-1 3 To reverse PY a/r 7,229.98 4 To record CY a/r 8,786.18 17 To adjust assessments to budget 25.70 4015. 000 R TH Surcharge (41,148.50) (41,475.00) Y-1 3 To reverse PY a/r 842.00 4 To record CY a/r 1,118.50 17 To adjust assessments to budget 50.00 4105. 005 R Bank interest (770.08) (875.99) Y-2 9 To adjust interest to actual 0.54 11 To adjust interest to actual 4.12 13 To record CY accrued interest 110.57 4105. 006 R Bank Interest TH (43.66) (42.99) Y-2 10 To adjust for interest & bank fees 0.67 4110. 000 R Late Fees (1,130.98) (1,232.08) 3 To reverse PY a/r 1,040.30 4 To record CY a/r 1,141.40 4700. 000 R Attorney Fee Reimbursement (475.00) (5,942.20) 3 To reverse PY a/r 11,947.29 4 To record CY a/r 17,438.79 17 To adjust assessments to budget 24.30 4999. 000 R Prepaids 8,262.25 0.00 2 To reclass prepaid assessments 8,262.25 5020. 000 E Audit & Tax preparation 1,300.00 1,345.00 X-1 7 To reverse 12/11 a/p 900.00 8 To record 12/12 a/p 945.00 5040. 000 E Bank Service Charge 740.00 740.00 10 To adjust for interest & bank fees 95.00 16 To record bank fees as reserve expenditure 95.00
Basis: Adjusted Fallsreach HOA FALLSREACH Trial Balance Worksheet Page 2 Dec 31, 2012 Adjustments Adjustments Dec 31, 2012 Account T Description Unadjusted Debit Credit Adjusted Workpaper 5063. 000 E CCOC 894.00 894.00 X-1 5195. 000 E Insurance Premium 5,406.00 5,343.48 X-1 6 To adjust prepaid insurance 62.52 5240. 000 E Legal Fees 7,347.00 6,146.70 X-1 7 To reverse 12/11 a/p 125.00 7 To reverse 12/11 a/p 254.90 7 To reverse 12/11 a/p 265.00 7 To reverse 12/11 a/p 910.00 8 To record 12/12 a/p 354.60 5260. 000 E Management Fee 7,420.00 7,420.00 X-1 5310. 000 E Organization & Admin 979.48 979.48 5325. 000 E Postage/Printing/Copying 1,595.54 1,595.54 5440. 000 E Water Quality Prot Charge 3,161.14 3,161.14 X-1 5445. 000 E Website 600.00 600.00 X-1 6180. 000 E Grounds Non-Contract (Gen) 60,934.74 60,934.74 X-1 6180. 008 E Grounds Non-Contract (TH) 16,743.00 16,743.00 X-1 6200. 000 E Landscape Maint Contract 45,502.84 45,502.84 X-1 6325. 008 E Repair/Maint (TH) 1,352.40 1,352.40 6330. 000 E Security Patrol 180.00 0.00 7 To reverse 12/11 a/p 180.00 6355. 010 E Snow Removal (TH) 1,362.00 1,362.00 X-1 6360. 000 E Storm Water Maintenance 360.00 360.00 7620. 000 E Electricity (TH) 3,951.29 3,940.89 X-1 7 To reverse 12/11 a/p 134.81 7 To reverse 12/11 a/p 75.25 7 To reverse 12/11 a/p 29.72 8 To record 12/12 a/p 133.58 8 To record 12/12 a/p 65.25 8 To record 12/12 a/p 30.55 7950. 000 E Bad Debt Expense 0.00 3,425.84 E-2 5 To adjust allowance for bad debt 3,425.84 8010. 000 E Reserve Expenditure 6,368.00 6,463.00 R-1 14 To record bank fees as reserve expenditure 95.00 8012. 000 E Reserve Expenditure TH 51,987.00 36,693.00 R-1 15 To adjust refund of asphalt deposit to reserve expense 15,389.00 16 To record bank fees as reserve expenditure 95.00 8130. 000 E Transfer Interest to Rsrv-General 682.58 678.46 R-1 12 To adjust reserve interest 4.12 8135. 000 E Transfer Interest to Rsrv-TH 6.91 6.24 R-1 12 To adjust reserve interest 0.67 8140. 000 E Transfer to Reserve 35,000.00 35,000.00 R-1 8145. 000 E Trnsfr to Reserve TH 8,250.00 8,250.00 R-1 8390. 000 E Transfer from Reserve (6,463.00) (6,463.00) R-1 8390. 300 E Transfer from TH Reserve (52,082.00) (36,693.00) R-1 15 To adjust refund of asphalt deposit to reserve expense 15,389.00 Total 0.00 132,084.32 132,084.32 0.00 Profit/(Loss) (5,009.45) 13,589.96 8,580.51
Prepared by Reviewed by Fallsreach HOA FALLSREACH Adjusting Journal Entries Page 1 Date Account Reference Type Number Description Debit Credit 1 Adjusting 12/31/12 2 Adjusting 12/31/12 1010.200 SSB (general) Reserve 430.18 1600.000 Assessments Receivable 21,059.57 1750.000 Allowance for Bad Debt 10,354.02 1900.000 Prepaid Insurance 4,884.34 2100.000 Accounts Payable 2,874.68 2200.000 Prepaid Owner Assessments 8,958.40 3200.000 Reserve Fund 6,287.30 3200.010 Reserve Fund Townhouse 4,058.84 3600.000 Retained Earnings 24,294.98 3600.000 Retained Earnings 17,879.53 To tie in members' equity 3 Adjusting 12/31/12 4999.000 Prepaids 8,262.25 2200.000 Prepaid Owner Assessments 8,262.25 To reclass prepaid assessments 4 Adjusting 12/31/12 1600.000 Assessments Receivable 21,059.57 4000.000 General Assessment 7,229.98 4110.000 Late Fees 1,040.30 4015.000 TH Surcharge 842.00 4700.000 Attorney Fee Reimbursement 11,947.29 To reverse PY a/r 5 Adjusting 12/31/12 4110.000 Late Fees 1,141.40 4000.000 General Assessment 8,786.18 4015.000 TH Surcharge 1,118.50 4700.000 Attorney Fee Reimbursement 17,438.79 1600.000 Assessments Receivable 28,484.87 To record CY a/r 6 Adjusting 12/31/12 1750.000 Allowance for Bad Debt 3,425.84 7950.000 Bad Debt Expense 3,425.84 To adjust allowance for bad debt 1900.000 Prepaid Insurance 62.52 5195.000 Insurance Premium 62.52
Prepared by Reviewed by Fallsreach HOA FALLSREACH Adjusting Journal Entries Page 2 Date Account Reference Type Number Description Debit Credit 7 Adjusting 12/31/12 To adjust prepaid insurance 8 Adjusting 12/31/12 2100.000 Accounts Payable 2,874.68 5240.000 Legal Fees 125.00 5240.000 Legal Fees 254.90 7620.000 Electricity (TH) 134.81 7620.000 Electricity (TH) 75.25 7620.000 Electricity (TH) 29.72 6330.000 Security Patrol 180.00 5240.000 Legal Fees 265.00 5240.000 Legal Fees 910.00 5020.000 Audit & Tax preparation 900.00 To reverse 12/11 a/p 9 Adjusting 12/31/12 7620.000 Electricity (TH) 133.58 7620.000 Electricity (TH) 65.25 7620.000 Electricity (TH) 30.55 5020.000 Audit & Tax preparation 945.00 2100.000 Accounts Payable 1,528.98 5240.000 Legal Fees 354.60 To record 12/12 a/p 10 Adjusting 12/31/12 1010.120 SSB (general) Operating 0.54 4105.005 Bank interest 0.54 To adjust interest to actual 11 Adjusting 12/31/12 1010.300 Smith Barney TH Reserve 95.67 4105.006 Bank Interest TH 0.67 5040.000 Bank Service Charge 95.00 To adjust for interest & bank fees 1010.200 SSB (general) Reserve 4.12 4105.005 Bank interest 4.12 To adjust interest to actual
Prepared by Reviewed by Fallsreach HOA FALLSREACH Adjusting Journal Entries Page 3 Date Account Reference Type Number Description Debit Credit 12 Adjusting 12/31/12 13 Adjusting 12/31/12 8130.000 Transfer Interest to Rsrv-Genera 4.12 8135.000 Transfer Interest to Rsrv-TH 0.67 3200.000 Reserve Fund 4.12 3200.010 Reserve Fund Townhouse 0.67 To adjust reserve interest 14 Adjusting 12/31/12 1800.000 Accrued interest 110.57 4105.005 Bank interest 110.57 To record CY accrued interest 15 Adjusting 12/31/12 8010.000 Reserve Expenditure 95.00 3200.000 Reserve Fund 95.00 To record bank fees as reserve expenditure 16 Adjusting 12/31/12 8012.000 Reserve Expenditure TH 15,389.00 8390.300 Transfer from TH Reserve 15,389.00 To adjust refund of asphalt deposit to reserve expense 17 Adjusting 12/31/12 8012.000 Reserve Expenditure TH 95.00 5040.000 Bank Service Charge 95.00 To record bank fees as reserve expenditure 4000.000 General Assessment 25.70 4015.000 TH Surcharge 50.00 4700.000 Attorney Fee Reimbursement 24.30 To adjust assessments to budget TOTAL 132,084.32 132,084.32