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HomeMy WebLinkAbout1937_REPORT OF EXAMINATION-- 00000 -- H ORT 0 WCALMINAT® COUNTRY CLUB DISTRICT SERVICE COMPANY - MINNEAPOLIS, MINNESOTA December 31, 1937 -- 00000 - -00000 a5 CiO�TS�o• os• oa•e..•••so•s•..•••.•.••.••eeoo PAGE 3 BALANCE p r Y E F a j o o o . • • • . • • • o • • • • • • • • • • • • • • • • • -- SPL• o•. so. ••.•o•••••e•••••••••••••••.•••� 10 PROFIT AND LOSS STATEmENT.•...o .............. 11 — - OPERATING COSTS AND EXPENSES.••••.••.•..•.... 3.2 PRWERTY AND 1193JW .VGIBLES.o••o•e•o••••o•••*..• 13 - 00000•." AKRON ATLANTA BALTIMORE IRN HAM E R N S T & F R S T PHILADELPHIA PITTSBURGH PORTLAND E CE� BUFFALO OVD D R NO CANTON ROCHESTER CHICAGO CINCINNATI ACCOUNTANTS AND AUDITORS ST. LOUIS ST. PAUL CLEVELAND L DALLAS SAN ANTONIO SAN FRANCISCO DA TN SYSTEM SERVICE SEATTLE DEN VOER DETROIT WASHDINGTON FORT WORTH WINSTON -SALEM YOU NGSTOWN GRAND RAPIDS HOUSTON INDIANAPOLIS KALAMAZOO MINNEAPOLIS TO RONTO,CAN ADA KANSAS CITY LOS ANGELES CORRESPONDENTSAT LONDON LOUISVILLE FIRST NAT L -SOO LINE BLDG PARIS . BERLIN MEMPHIS MIAMI HAMBURG M LWAUKEE - ANTWERP MINNEAPOLIS NEW ORLEANS NEW YORK May 21, May 1938. CABLE ADDRESS "E N. Y. //RNSTAU /DIT" Country Club District Service Company, Tillage of Edina, Minnesota. We have made an examination of the balance sheet of the COUNTRY CLUB DISTRICT SERVICE COMPANY as at December 31, 1937 and of the statement of profit and loss and surplus for the year ended at that date. In connection therewith, we examined or tested accounting records of the Company and other supporting evidence, and obtained information and explanations from an officer of the Company; we also made a general review of the accounting methods and of the operating and income accounts for the years but we did not make.a detailed au- dit of the transactions. The Company was incorporated under the laws of the _State of Minnesota on May 14 1923 for a period of thirty years and on October 319 1935 the charter eras amended to provide for perpetual existence. On the same date the authorized capital was changed from 500 shares of $100.00 par value stock to 300 shares of 65 cumulative preferred stock having a par value of $100.00 per share and 200 shares of no par common stock. Requirements of.the charter relating to re- tirement of the preferred stock were eliminated subsequent to December 319 1937• The charter limit of indebtedness is $4009000.00. ' he Company's operations until the latter part of 1935 were carried o as a part of the operations of Thorpe Bros. and we are advised no separate records of the assets or liabilities or oper- ations were maintained. As of November 18, 1935 the properties per - taining to the operation of the water.and sewer systems in the Village of Edina were turned over to the Comp in exchange for the issuance of certain shares of its- capital stock (its then entire outstanding capital stock) and, the ioa�nP a ain liabilities. Subsequently the controlling interest`s tie outstanding cap stock was acquired by other interests which are now operat the Company. Prior to the time of the,acquisition of control by new interests, adequate records of the assets pertaining to the physical properties of the water and sewer distribution systems had not been maintained, and no adequate accounting system was in effect until as of January 1. 193 7. Effbetive as of January 1 1979 an accounting system was devised and installed to provide an eirec ive control of its assets, liabilities and opera- tions. As at January 1, 1937 the operating properties were appraised by Mr. Albert Graber, Consulting Engineer of Minneapolis, and the val- ues shown by his appraisal were recorded on the books of the Company as herein outlined. Our certifccate on report upon an audit or examination is delivered to client with the distinct understanding that any advertisement, publication, or copy therefrom, in full or in part, of such certificate or report, shall be in the form to be approved by us. As a preventive against fraud, attention is directed to the fact that all pages in this report should bear our water mark. -3- As outlined in the preceding paragraph, the Company main- tained no adequate records prior to January 1, 1937. At that time the general books were set up on the following basis :, Reproductive values of property and intangibles as shown by Appraisal report of Albert Craber, Consulting Engineer, as at January 19 1937 ........ $18799 77.45 Less reserve for depreciation as shown by appraisal as at January 1, 193 7•••.•.•.•••.•••.•••••••.•..•. 22jzgel RECORDED AMOUNT FOR PROPERTIES $1589799-P-1 Credited to preferred stock - 183 shares.......... $18,300.00 Credited to common stock - 200 shares ....... _6,7ao.00 Liabilities assumed (less prepaid interest $449.93) 1a_ 537•`63,r. 35. 5-37.63. CREDITED TO CAPITAL SURPLUS $123, 261.63 - = assn= ataaso Accounts payable .... ...................`........... e c�cied • Rinterest ... ............................... serve for depreciation ......••••..••• ........•. Less: , Cash on hand .............. •e•.a•••s • s••.o•.•s••• Accounts receivable ... •..•••..•e•.....•••....... Materials and supplies .....• .................... EARNED SURPLUS (iDEFICIT) - JANUARY 19 65 91 .29 987.60 $ 19931.54 $ 626.88 549.61 147.73 1.324.22 1937 $ 607.32 In view,of the nature of the valuations recorded, as out- lined herein, it is considered that the amount credited to capital surplus includes an undetermined amount of appreciation and contributed surplus as well as any excess of the fair value of the property over the par value of capital stock issued and liabilities assumed therefor* The balance sheet as at December 31 1937, included herein, has been prepared on the basis outlined in the following comments, which also set forth the scope and nature of our examination: Property and intangibles are included in the balance sheet on the basis of appraisal by la?. Albert Graber, Consulting Engineer, as at January 1, 1937, plus subsequent additions at cost. Additions which were made in 1936 were included in the appraisal at cost. Reproductive values shown, by the appraisal report were recorded in the asset accounts, and ac- cumulated depreciation shown by the appraisal report, plus an adjustment of $987.609'was recorded in the depreciation reserve accounts. It is the Company's policy to provide for depreciation on the basis of rates believed by the management to be sufficient to write off the value of the properties over their estimated useful lives. We reviewed vouchers and other data in support of additions for the year 1937 and, in our opinion, the charges were properly classified as capital additions. We reviewed the deprecia- tion charges for the year and found them to have been made on the basis of rates established by the management at January 1, 1937• Z�q_ -4- -- 'Demand deposit of $69320.82 was verified by reconcilement of the amount shown above to the balance reported directly to us by the depository. Canceled checks for one month of the year were compared to disbursement records and the recorded cash receipts for the same month were traced to deposit credits shown on bank statements in the Company's files. Vie did not further support disbursements by reference to vouchers, pay roll records, etc. Cash on hand in the amount of $9.00 was traced.to subsequent deposit as indicated on a bank statement in the Company's files. Accounts receivable were analyzed by employees of the Company and the individual accounts and classifications were checked by us to the patrons ledger. The balances at December 319 1937 were classified as follows: CLASSIFICATION Water division ..•...•.....• .................. $348.4 Sewer division. ..............., ............... 32964 ++ Miscellaneous .. ..............................$ TOTAL $471.05 Payments on the above accounts to May 19 1938 aggregated $407.73. Based upon our review of the accounts and discussion with an officer of the Company, it is our opinion that no reserve for doubtful accounts is neces- narye inventories, consisting of meters and sundry supplies, were taken by physical count on March 31 1938 and adjusted for changes between December 31, 1937 and March 31, 1936. We reviewed the basis of pricing with the management, and, in our opinion, the inventories are valued at cost. Escrow deposit consisting of a certified check for $150.00 on deposit with the -Clerk of the District Court, Hennepin County, Minnesota, has been posted in connection with a lawsuit in.which the Company has been named defendant. Unexpired insurance premiums were checked by us. From policies inspected or data furnished to us the Company carries the follow- ing insurance coverage: Fire insurance ....... ..................... $ 3,550.00 Public liability.. ......•.• ............... 209000.00 Fidelity bond ............................. 5,000.00 W5r First mortgage of $20,000.00 is dated November 1, 1937 and is payable to the St. Paul Fire and Marine Insurance Company being due $19000.00 on November 1st each year to November 19 1951 and 46,000.00 on November 1, 1952. The mortgage is secured by the buildings, wells, tanks, reservoirs and equipment located in the Village of Edina. The mortgage liability was confirmed directly to us by the holder. At the option of the Company the mortgage may be increased $109000.00 to cover additional capital outlay. Advances for construction represents funds advanced by Thorpe Bros. for construction of water mains in the woodale section. This advance is to be liquidated by paying to.Thorpe Bros. 50% of the gross revenues from water in this section through 1947- Any balance unpaid after application of the revenues as described is payable March 319 19480 Account payable for construction was supported by vendors invoice. The amount payable to an office;j, Company representing un- drawn salary and expenses for 1936 arfid -7 j was independently confirmed. Federal and state pay roll taxes, local taxes# capital stock tax and inter- est were computed by ust Capital stock outstanding was in agreement with open stock certificate stubs* We reviewed the articles of incorporation by -laws and minutes of stockholders and directors meetings. No contingent liabilities were reported to us and as far as we could ascertain none existed at the date of the balance sheet. The Company is named defendant in a lawsuit in the amount of $75.00 on which it has deposited $150.00 in escrow pending final determination of its liability, if any, thereon. An officer of the Company has certified that it was not committed on any unfavorable purchase or sales contracts. Federal and state income tax returns of the Company have not been examined by the respective tax authorities since the beginning of operations (1936) under the present management. Changes in the surplus (deficit) account for the year are detailed in a schedule included in this report. We have made a review of.the income and expense accounts for the year and include herein a statement of profit and loss showing the results of operations. Revenues for the year include ,gale of water, sewage service charges and income from sale of meters. No revenue was derived from hydrant rentals# street and park sprinkling, street washing, fire protection# or other services to the Village of Edina, no provision being made therefor in the franchise. "6- M'0 0 �1 In our opinion, based upon our examination, the accompany- ing balance sheet and related statements of.profit and loss and surplus fairly present the position of the Company at December 31, 1937 and the results of its operations for the year ended at that date. Further, it is- our opinion that the statements have been prepared in accordance with accepted principles of accounting, e!! Certi led &!CACc�ountants. 067- M -- - -- COUNTRY CLUB DISTRICT December s�mca�aaccaaa: rcarssaaasaAa�c= ��a= c-= xsxac===== accnrcaa�am= a= a��aascccc= aamaa�c�= =ac'e:s PROPER-17 ANDWAUQUkM Based on independent appraisal as of January 1, 19379 Plus subsequent additions at costa Land Wells, buildings, tank, distribution system, tools and equipment, etc. Less reserve for depreciation (including $29,178.1 accrued at date of appraisal Intangibles CURRENT ASSETS Cash Accounts receivable Inventory - at cost OTHER ASSETS Escrow d posit (on lawsuit of $75.00) DEFEEM CA& CES Unexpired insurance premiums wgr $ 3,000.00 $190,636.48 33s952.54 156,618 -e 6 80 • $l 5, 445. $ 6,329.82 471.0 17 6,980.05 150. ®0 82.18 $�g`658.83 __ SERVICE COMPANY 319 1937 cs�aa��css= xs= �= a�aassa== �= �a= ss�a�asa= �aasaad= ds= a�asza =a : �ssss� =aca�ssaasoaa= s�os��s. -rsa� �IADIL�CTIES First real estate mortgage",;.-, authorized - $30,000.00 (secured by operating proper+,y) due $19000.00 annually on November lst to 1951 and $6,000.00 on November 1, 1952 Less due within one year shown in current liabilities Advances for construction - payable from revenue - due March 31, 1948 ILIT Accounts payable: For construction Due to officer. Consumers credit balances Federal and state pay roll taxes Accrued: Local taxes Federal capital stock tax Interest Federal and state taxes on income - estimated: Provision for year ended December 31, 1937 Current maturity of long term debt - due November 1, 1938 CAPITAL STOCK AND %WLt�S Capital stocks Preferred - 6% cumulative - par value $100.00 per share - redeemable at par: Authorized 300 shares;. issued 183 shares Less in treasury - 43 shares at cost Common - no par value (at total stated value) - Authorized, issued and outstanding - 200-shares Surplus: Capital surplus Earned surplus (deficit) r9- $ 209000.00- 1900o.00 $ 19,000.00 5.182.05 $ _249182.05 2970 1:60 - 15.39: 8� $ 3,568-16 $ 7.50 12.00 166.67 .I--- $ 18,300.00 186.17 172.66 .1,000.00- 41926.99 4-300-001 14o000.00 6,70o.00 $ 20,700.00 mss' $123', 261.63 . e ll.84 X122, 849.79 . 143 , 5A2 .,Z2 $1722658.83 aaszaaasava I ' i COUNTRY CLUB DISTRICT SERVICE COMPANY Year ended December 319 1937 WARM Arising from revaluation of properties as at Januax7 12 19371 $1237261.63 MR 2MM DEFICIT) Defic •tat January 11 1937 Add adjustments ,applicable to prior Correction of accounts receivable Accrued takes Income taxes for 1936 Correction of meter inventory Not profit for the year d f d to k 1� 6o7.32 Ui.Videntaw pai on pre ®rre a c (at rate of $6.00 per year) ,060. ?3 /` EARNED SURPWS (DEFICIT). DECE R 319 1937 _.,� 411.84 SUPIPWS - DEC 319 1937 $122-t849.79 .10- -11-� — EMIT AND =STATEMIMt COMMY CLUB DISTRICT SERVICE COMPANY Year ended December 319 1937 WATER SEWER . COMBINED DIVISION DIVISION sasocsc== as�cs= es �a�- o�a-e as�acx- aoa�ca��c=-:= aaaaaczacssz== a�a= axc= ao= a= assaaarcaacs= aasec Sales and services to consumers $149212.86 1 $1292447.86 $19983'91✓ Miscellaneous revenues - net GROSS SAM $149 289.5 $129305,74 983.91 Operating costs and expenses as shown by schedule: Power and pumping $ 39520. �5 $ 2, 927.74 . 1 � 593 a Distribution expenses 39710.2 29042.94. 19667.88 Accounting and collection 19221.10 19056.63 164.47 Administrative and general 49149.05 29815.43 1933 .62 '312 661®72 - � 3,842:74 4 $ "- 98 PROFIT OR LOSS BEFORE TAXES ON'INCOME $ 19 7.93 $ 394 3.00 $1977 ®07 Federal and state taxes on.incomes Provision for current year estimateds Federal normal tax $ 121.59 $ 121..59 Federal surtax 23.63 23.63 State tax 27.44 27.44 1 22.66 172066 �o�► NET PROFIT OR LOSS $ 19515.27 $ 39290.34 $4775a07 .Dote A - D3�thiststatemente included in expenses amount to $3,791,75, .�y -11-� x120 2PERATZG- COSTS AND EXPENSES CO ..DAY CLUB DISTRICT SERVIQ ~COMPANY �• ,� -Year ended December 319 1937 __ _°______ ___--=____ y _____________________________ WATER =- SEWER C Bn= DTYWrlvl DIVISION = ��aa��. -= sass =mars_ =�aaaa =.;, --- a�= a- c:caaaa.aa . c-= �aeesa�aaco�a���3�= =asss�aa- �aCC�a:.aa�a� =asst• Power and pumpinga_ Operation labor $ 21.00 $ 21,00 Supplies and expense 274.01 166.88 $ lO7.1 Maintenance 190,74 24.38 16b.39 Power purchased Depreciation 19982,22 199 8.20 44.02 j._ 769' 78` 7 9.78 _.. Flushing sever mains 275:50 275.50 Local taxes 0* 0 3952 75 X29 927* 74 rb 593.01 Distribution expenses - Operation of distribution lines $ 42.63 $ 42,63 Maintenance 646.22 646.22 Depreciation 3902..97, -->19354-09 -1 $19667.88v 3, 710 ®2 '$2,042994 $19 667s 86 Accounting and collection: Meter reading $ 125.00 $ 125.00 Salaries and wages 945.00 795.00 $ 150,00 Pay roll taxes 31.46 • 26.34 5,12 Miscellaneous 119.64 1,2`'1.10 1100 9.35 A y1,056s 3 $ 164 ®47 Administrative and generals Salaries and wages $ 960,00 $ 810.00 $ 150,000 .Expenses of general officers 93:75 69.25 24.50 Insurance 157.77. 107.77 50.00 Mortgage expense $17.15 917.15 Interest 674072 674,72 Legal services Pay roll taxes 31,46 26.34 512 Federal capital stock tax 24.00 20000 4.00 Miscellaneous 119280.20 180020 19100.00 4 149.135 129815m43 - $12 AL $129601.72 $89842.74 $39758.98 n x120 -r COUNT HY CLUB DISTRICT SERVICE COMPANY 1 December 311 19937 -- =a : asa�asacxaesas =ss�szaaszsasi�caa = = =s =rsasaxas=raaaasasaasaas: �a= xa�aa =x==== aaxaasa= xcacssssaaas : =axsaa === == s= =acarccxa__ =xa�a: sx =sscsac�a = =s :sue =�ssa =�aa= xs:�x =�bF� a A S S E T • BALANCE HESEM FO ATION JANUARY BALANCE BALANCE BALAWL'E'• - / BOOK • VALUS. ; 19 1937 DECENBER JANUARY CURRENT DECEMBER. DECMWER ; PER APPRAISAL ADDITIONS 319 1937 RATE 1, 1937 PROVISION 31; 1937 31,. 1937 are =as = sass= =a,:.ssssasa s=asasaaaa=s � �s = =� s= sasasara = =axas =sagas sxmaa� aaas= xeaaaa =asso.r -ae.s s=x sasx == asr =s aasx= a.:..x =sxaa x�es === ssasax � =sa eo =s =ate == s:saa� = == ase =eaixa���a MPFATUY WATER DIVISION t' Land $ 3,000.00 $ 31000.00 $ 3,000-. Qei. Building 1,562.47 $ 525.88 2,088.35 4 % $ 62.50 $ 73.02 $ 1 8 5.52 12952.31 Well Number One 21578.27 21578.27 1 2/3 42.97 42.97 .94 27492.33 Well Humber Two -o- 11950.00 19950.00 1 2/3 -Q- .16.25 16.2 1,93 Elevated tank and piping 109053.34 10,05 .34 4 3,102.3 402.1 3,504.4 6, 44. Pumping equipment 3)417.71 1,6 30.74 51 04 . q. 5 170.9 211.6 382.55 4,65.. 0 Water distribution system 76,042.41 %,169.27 85,211.6 12/3 12,130.90 11354.09 13f 84.99 71,72. 6 W 98,654. 20- , I,1,275.89 '1095930-09 1595R0�),59 IQj100u12. x,179 09.71 � 92�32'1•3 S ER DIVISION- Sanitary 1 eawe:r system $ 51,276.71. $ 75.00 $ 51,351.71 2 $ 8,68 .92 $1,026.29 $ 2 $ 41,639.50 Storm sewer system 2,079 .68 2,079.68 2 5, 6 g5 6441l ,608.54 25,471..14 33356.39 75.00 332431.39 <A4�652•�37 �1,667. ^�16 %320.75 � 67,110.64 Miscellaneous tools and equipment 200.00 .00 2 .00 10 3.33 23.75 27-08 247-92 $182,210.59 $11,425-69 $193,636.48 $30t165-79 $31791-75 $331957-54 $159,678-94' „INTANC�ZB,�LES Going concern value 5..766.86 5,766.86 -o- -o- 5, Z66,86,G , TOTAL $1877977-45 $11,425.89 $199)403-34 $309165.79 $31791-75 $33,957-54 $165,445 • == asaaassaao_� 1x11= a. =ss_axssn =rasa _a= asasasasa_cs =aaa_ ass = =s =_ =saas�.aaaa�s- sxsaosx =�xx