E21-9 Lessee and Lessor Accounting Issues
The following information is available for a non-cancelable lease of equipment that is classified as a sales-type lease by the lessor and as a capital lease by the lessee. Assume that the lease payments are made at the ginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a three-year life.
REQUIRED:
1. Record the lease (including the initial receipt of $2,000) and the receipt of the second and third installments of $2,000 in the accounts of the Anson Company. Carry computations to the nearest dollar.
Click here for the solution: The following information is available for a non-cancelable lease of equipment that is classified as a sales-type lease by the lessor and as a capital lease by the lessee
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Tuesday, April 12, 2016
Wednesday, October 14, 2015
The units of an item available for sale during the year were as follows
Ex 6-8 The units of an item available for sale during the year were as follows:
Jan 1 Inventory 27 units at $120
Feb 17 Purchase 54 units at $138
July 21 Purchase 63 units at $156
Nov 23 Purchase 36 units at $165
There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used.
Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method.
Click here for the solution: The units of an item available for sale during the year were as follows
Jan 1 Inventory 27 units at $120
Feb 17 Purchase 54 units at $138
July 21 Purchase 63 units at $156
Nov 23 Purchase 36 units at $165
There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used.
Determine the inventory cost by (a) the first-in, first-out method, (b) the last-in, first-out method, and (c) the average cost method.
Click here for the solution: The units of an item available for sale during the year were as follows
Sunday, September 27, 2015
The units of Product YY2 available for sale during the year were as follows
The units of Product YY2 available for sale during the year were as follows:
Apr 1 Inventory 16 units @ $30
Jun 16 Purchase 30 units @ $33
Sep 28 Purchase 45 units @ $37
There are 17 units of the product in the physical inventory at March 31. The periodic inventory system is used.
Determine the difference in gross profit between the LIFO and FIFO inventory cost systems.
Click here for the solution: The units of Product YY2 available for sale during the year were as follows
Apr 1 Inventory 16 units @ $30
Jun 16 Purchase 30 units @ $33
Sep 28 Purchase 45 units @ $37
There are 17 units of the product in the physical inventory at March 31. The periodic inventory system is used.
Determine the difference in gross profit between the LIFO and FIFO inventory cost systems.
Click here for the solution: The units of Product YY2 available for sale during the year were as follows
Friday, September 18, 2015
The following information was made available from the income statement and balance sheet of Lauren Company
1. The following information was made available from the income statement and balance sheet of Lauren Company.
Item 12/31/10 12/31/09
Accounts Receivable $53,400 58,600
Accounts Payable 35,600 32,700
Merchandise Inventory 85,000 79,000
Sales (2010) 243,000
Interest Revenue (2010) 5,600
Dividend Revenue (2010) 1,200
Tax Expense (2010) 12,300
Salaries Expense (2010) 28,000
COGS (2010) 65,000
Interest Expense (2010) 3,600
Operating Expenses 28,500
Complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010.
Click here for the solution: The following information was made available from the income statement and balance sheet of Lauren Company
Item 12/31/10 12/31/09
Accounts Receivable $53,400 58,600
Accounts Payable 35,600 32,700
Merchandise Inventory 85,000 79,000
Sales (2010) 243,000
Interest Revenue (2010) 5,600
Dividend Revenue (2010) 1,200
Tax Expense (2010) 12,300
Salaries Expense (2010) 28,000
COGS (2010) 65,000
Interest Expense (2010) 3,600
Operating Expenses 28,500
Complete the cash flow from operating activities section for Lauren Company using the direct method for the year ended December 31, 2010.
Click here for the solution: The following information was made available from the income statement and balance sheet of Lauren Company
Tuesday, September 8, 2015
The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005
Problems 8-4B
The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005:
a. After posting is complete, the December 31 cash balance according to the accounting records is $31,743.70, and the bank statement cash balance for that date is $45,091.80.
b. Check No. 1273 for $1,084.20 and Check No. 1282 for $390.00, both written and entered in the accounting records in December, are not among the canceled checks. Two checks, No. 1231 for $2,289.00 and No. 1242 for $370.50, were outstanding on the most recent November 30 reconciliation. Check No. 1231 is listed with the December canceled checks, but Check No. 1242 is not.
c. When the December checks are compared with entries in the accounting records, it is found that Check No. 1267 had been correctly drawn for $2,435 to pay for office supplies but was erroneously entered in the accounting records as $2,453.
d. Two debit memoranda are enclosed with the statement and are unrecorded at the time of the reconciliation. One debit memorandum is for $749.50 and dealt with an NSF check for $732 received from a customer, Titus Industries, in payment of its account. The bank assessed a $17.50 fee for processing it. The second debit memorandum is a $79.00 charge for check printing. Style did not record these transactions before receiving the statement.
e. A credit memorandum indicates that the bank collected $20,000 cash on a note receivable for the company, deducted a $20 collection fee, and credited the balance to the company’s Cash account. Style did not record this transaction before receiving the statement.
f. Style’s December 31 daily cash receipts of $7,666.10 were placed in the bank’s night depository on that date, but do not appear on the December 31 bank statement.
Required
1. Prepare the bank reconciliation for this company as of December 31, 2005.
2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of December 31, 2005.
Analysis Component
3. Explain the nature of the communications conveyed by a bank when the bank sends the depositor (a) a debit memorandum and (b) a credit memorandum.
Check (1) Reconciled balance, $50,913.20; (2) Cr. Note Receivable $20,000
Click here for the solution: The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005
The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005:
a. After posting is complete, the December 31 cash balance according to the accounting records is $31,743.70, and the bank statement cash balance for that date is $45,091.80.
b. Check No. 1273 for $1,084.20 and Check No. 1282 for $390.00, both written and entered in the accounting records in December, are not among the canceled checks. Two checks, No. 1231 for $2,289.00 and No. 1242 for $370.50, were outstanding on the most recent November 30 reconciliation. Check No. 1231 is listed with the December canceled checks, but Check No. 1242 is not.
c. When the December checks are compared with entries in the accounting records, it is found that Check No. 1267 had been correctly drawn for $2,435 to pay for office supplies but was erroneously entered in the accounting records as $2,453.
d. Two debit memoranda are enclosed with the statement and are unrecorded at the time of the reconciliation. One debit memorandum is for $749.50 and dealt with an NSF check for $732 received from a customer, Titus Industries, in payment of its account. The bank assessed a $17.50 fee for processing it. The second debit memorandum is a $79.00 charge for check printing. Style did not record these transactions before receiving the statement.
e. A credit memorandum indicates that the bank collected $20,000 cash on a note receivable for the company, deducted a $20 collection fee, and credited the balance to the company’s Cash account. Style did not record this transaction before receiving the statement.
f. Style’s December 31 daily cash receipts of $7,666.10 were placed in the bank’s night depository on that date, but do not appear on the December 31 bank statement.
Required
1. Prepare the bank reconciliation for this company as of December 31, 2005.
2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of December 31, 2005.
Analysis Component
3. Explain the nature of the communications conveyed by a bank when the bank sends the depositor (a) a debit memorandum and (b) a credit memorandum.
Check (1) Reconciled balance, $50,913.20; (2) Cr. Note Receivable $20,000
Click here for the solution: The following information is available to reconcile Style Co.’s book balance of cash with its bank statement cash balance as of December 31, 2005
Sunday, September 6, 2015
The following information is available for year 1 for Dancer Components
13-36 (Prepare Budgeted Financial Statements) The following information is available for year 1 for Dancer Components:
Revenues (300,000 units). . . . . . . . . . $5,700,000
Manufacturing costs
Materials . . . . . . . . . . . . . . . . . . . . . $ 336,000
Variable cash costs . . . . . . . . . . . . . 284,800
Fixed cash costs . . . . . . . . . . . . . . . 655,200
Depreciation (fixed) . . . . . . . . . . . . . 1,998,000
Marketing and administrative costs
Marketing (variable, cash) . . . . . . . . 844,800
Marketing depreciation . . . . . . . . . . 299,200
Administrative (fixed, cash) . . . . . . . 1,018,400
Administrative depreciation . . . . . . . 149,600
Total costs . . . . . . . . . . . . . . . . . . $5,586,000
Operating profits . . . . . . . . . . . . . . . . . $ 114,000
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to increase by 18 percent, but prices are expected to fall by 5 percent. Material costs per unit are expected to decrease by 8 percent. Other unit variable manufacturing costs are expected to decrease by 2 percent per unit. Fixed manufacturing costs are expected to increase by 5 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 10 percent. Inventories are kept at zero. Dancer operates on a cash basis.
Required
Prepare a budgeted income statement for year 2.
Click here for the solution: The following information is available for year 1 for Dancer Components
Revenues (300,000 units). . . . . . . . . . $5,700,000
Manufacturing costs
Materials . . . . . . . . . . . . . . . . . . . . . $ 336,000
Variable cash costs . . . . . . . . . . . . . 284,800
Fixed cash costs . . . . . . . . . . . . . . . 655,200
Depreciation (fixed) . . . . . . . . . . . . . 1,998,000
Marketing and administrative costs
Marketing (variable, cash) . . . . . . . . 844,800
Marketing depreciation . . . . . . . . . . 299,200
Administrative (fixed, cash) . . . . . . . 1,018,400
Administrative depreciation . . . . . . . 149,600
Total costs . . . . . . . . . . . . . . . . . . $5,586,000
Operating profits . . . . . . . . . . . . . . . . . $ 114,000
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to increase by 18 percent, but prices are expected to fall by 5 percent. Material costs per unit are expected to decrease by 8 percent. Other unit variable manufacturing costs are expected to decrease by 2 percent per unit. Fixed manufacturing costs are expected to increase by 5 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 10 percent. Inventories are kept at zero. Dancer operates on a cash basis.
Required
Prepare a budgeted income statement for year 2.
Click here for the solution: The following information is available for year 1 for Dancer Components
Wednesday, September 2, 2015
The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012
2-9 The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012:
Revenues:
Property taxes $27,000,000
Sales taxes 13, 216,000
Fees and fines 1,124,000
Licenses and permits 1,921,000
Intergovernmental 868,000
Investment earnings 654,000
Expenditures:
Current:
General government 8,192,000
Public safety 24,444,000
Public works 6,211,000
Health and sanitation 1,693,000
Culture and recreation 2,154,000
Debt service – principal 652,000
Debt service – interest 821,000
Proceeds of long-term, capital-related debt 2,210,000
Transfer to special revenue fund 1,119,000
Special item – proceeds from sale of land 821,000
Fund balance, October 1, 2011
From the information given above, prepare, in good form, a General Fund Statement of Revenue, Expenditures, and Changes in Fund Balances for the City of Eastern Shores General Fund for the Year Ended September 30, 2012.
Click here for the solution: The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012
Revenues:
Property taxes $27,000,000
Sales taxes 13, 216,000
Fees and fines 1,124,000
Licenses and permits 1,921,000
Intergovernmental 868,000
Investment earnings 654,000
Expenditures:
Current:
General government 8,192,000
Public safety 24,444,000
Public works 6,211,000
Health and sanitation 1,693,000
Culture and recreation 2,154,000
Debt service – principal 652,000
Debt service – interest 821,000
Proceeds of long-term, capital-related debt 2,210,000
Transfer to special revenue fund 1,119,000
Special item – proceeds from sale of land 821,000
Fund balance, October 1, 2011
From the information given above, prepare, in good form, a General Fund Statement of Revenue, Expenditures, and Changes in Fund Balances for the City of Eastern Shores General Fund for the Year Ended September 30, 2012.
Click here for the solution: The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2012
The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012
2-8. The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012:
Expenses:
General government $10,300,000
Public safety 22,900,000
Public works 11,290,000
Health and sanitation 6,210,000
Culture and recreation 4,198,000
Interest on long-term debt, governmental type 621,000
Water and sewer system 11,550,000
Parking system 419,000
Revenues:
Charges for services, general government 1,110,000
Charges for services, public safety 210,000
Operation grant, public safety 698,000
Charges for services, health and sanitation 2,555,000
Operating grant, health and sanitation 1,210,000
Charges for services, culture and recreation 2,198,000
Charges for services, water and sewer 12,578,000
Charges for services, parking system 398,000
Property taxes 27,112,000
Sales taxes 20,698,000
Investment earnings, business-type 319,000
Special item – gain on sale of unused land,
Governmental type 1,250,000
Transfer from governmental activities to
Business-type activities 688,000
Net assets, July 1, 2011, governmental activities 11,222,000
Net assets, July 1, 2011, business-type activities 22,333,000
From the previous information, prepare, in good form, a Statement of Activities for the city of Northern Pines for the year ended June 30, 2012. Northern Pines has no component units.
Click here for the solution: The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012
Expenses:
General government $10,300,000
Public safety 22,900,000
Public works 11,290,000
Health and sanitation 6,210,000
Culture and recreation 4,198,000
Interest on long-term debt, governmental type 621,000
Water and sewer system 11,550,000
Parking system 419,000
Revenues:
Charges for services, general government 1,110,000
Charges for services, public safety 210,000
Operation grant, public safety 698,000
Charges for services, health and sanitation 2,555,000
Operating grant, health and sanitation 1,210,000
Charges for services, culture and recreation 2,198,000
Charges for services, water and sewer 12,578,000
Charges for services, parking system 398,000
Property taxes 27,112,000
Sales taxes 20,698,000
Investment earnings, business-type 319,000
Special item – gain on sale of unused land,
Governmental type 1,250,000
Transfer from governmental activities to
Business-type activities 688,000
Net assets, July 1, 2011, governmental activities 11,222,000
Net assets, July 1, 2011, business-type activities 22,333,000
From the previous information, prepare, in good form, a Statement of Activities for the city of Northern Pines for the year ended June 30, 2012. Northern Pines has no component units.
Click here for the solution: The following information is available for the preparation of the government-wide financial statements for the city of Northern Pines for the year ended June 30, 2012
Friday, August 14, 2015
The following three one-year "discount" loans are available to you
1. The following three one-year "discount" loans are available to you:
Loan A: $120,000 at a 7 percent discount rate
Loan B: $110,000 at a 6 percent discount rate
Loan C: $130,000 at a 6.5 percent discount rate
a. Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?
b. Calculate the percent interest rate or effective cost of each loan. Which one has the lowest cost?
Click here for the solution: The following three one-year "discount" loans are available to you
Loan A: $120,000 at a 7 percent discount rate
Loan B: $110,000 at a 6 percent discount rate
Loan C: $130,000 at a 6.5 percent discount rate
a. Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?
b. Calculate the percent interest rate or effective cost of each loan. Which one has the lowest cost?
Click here for the solution: The following three one-year "discount" loans are available to you
Thursday, August 13, 2015
The following information is available for the pension plan of Radcliffe Company for the year 2012
E20-1 (Pension Expense, Journal Entries) The following information is available for the pension plan of Radcliffe Company for the year 2012.
Actual and expected return on plan assets $15,000
Benefits paid to retirees $40,000
Contributions (funding) $90,000
Interest/discount rate 10%
Prior service cost amortization $8,000
Projected benefit obligation, January 1, 2012 $500,000
Service cost $60,000
Instructions
(a) Compute pension expense for the year 2012.
(b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2012.
Click here for the solution: The following information is available for the pension plan of Radcliffe Company for the year 2012
Actual and expected return on plan assets $15,000
Benefits paid to retirees $40,000
Contributions (funding) $90,000
Interest/discount rate 10%
Prior service cost amortization $8,000
Projected benefit obligation, January 1, 2012 $500,000
Service cost $60,000
Instructions
(a) Compute pension expense for the year 2012.
(b) Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2012.
Click here for the solution: The following information is available for the pension plan of Radcliffe Company for the year 2012
Tuesday, August 4, 2015
The following information is available for Sappy’s Surgical Shears for the fiscal year ending December 31, 20XX
The following information is available for Sappy’s Surgical Shears for the fiscal year ending December 31, 20XX.
Beginning balance in Finished Goods $ 17,000
Ending balance in Finished Goods 15,200
Beginning balance in Work in Process 2,500
Ending balance in Work in Process 1,836
Selling expenses 123,000
General and administrative expenses 89,000
Direct material cost 54,500
Direct labor cost 66,000
Manufacturing overhead 21,400
Sales 385,000
Prepare a schedule of cost of goods manufactured.
Click here for the solution: The following information is available for Sappy’s Surgical Shears for the fiscal year ending December 31, 20XX
Beginning balance in Finished Goods $ 17,000
Ending balance in Finished Goods 15,200
Beginning balance in Work in Process 2,500
Ending balance in Work in Process 1,836
Selling expenses 123,000
General and administrative expenses 89,000
Direct material cost 54,500
Direct labor cost 66,000
Manufacturing overhead 21,400
Sales 385,000
Prepare a schedule of cost of goods manufactured.
Click here for the solution: The following information is available for Sappy’s Surgical Shears for the fiscal year ending December 31, 20XX
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