E 15-4 Direct financing lease; lessor
Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080.
Related Information
Lease term 2 years (8 quarterly periods)
Quarterly rental payments $15,000 at the beginning of each period
Economic life of asset 2 years
Fair value of asset $112,080
Implicit interest rate
(Also lessee’s incremental borrowing rate) 8%
Required:
Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the inception of the lease through January 1, 2012. Edison's fiscal year ends December 31.
Click here for the solution: Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2011
Showing posts with label electronic. Show all posts
Showing posts with label electronic. Show all posts
Wednesday, October 7, 2015
Wednesday, September 23, 2015
The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones
Product costing in an ABC system (9th Edition)
The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:
The activities required to build the component follow:
Requirements
1. Complete the missing items for the two tables.
2. Why might managers favor this ABC system instead of August's older system, which allocated all conversion costs on the basis of direct labor?
Click here for the solution: The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones
The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:
The activities required to build the component follow:
Requirements
1. Complete the missing items for the two tables.
2. Why might managers favor this ABC system instead of August's older system, which allocated all conversion costs on the basis of direct labor?
Click here for the solution: The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones
Wednesday, September 2, 2015
Traber Electronics is a small privately owned retailer of electronic equipment and household appliances
Problem 2-37 Traber Electronics is a small privately owned retailer of electronic equipment and household appliances. Traber Electronics is required to provide audited financial statements as part of a due diligence investigation in consideration of a potential acquisition of Traber by a public company. In the interest of time, Traber appointed the audit firm of Makins & Howell, CPAs, without a formal proposal process. Makins & Howell immediately accepted the audit engagement in early October and agreed to the November 1 deadline for the auditor’s report.
Katie Kammins, CPA, was recently promoted to in-charge auditor for Makins & Howell and was assigned to the Traber audit along with Joel Misten, the firm’s university intern. Prior to her assignment to the Traber audit, all of Katie’s audit experience was in the health-care industry. Because most of Katie’s health-care clients had June 30 year ends, Katie was available in October to work on the Traber engagement.
Katie and Joel got right to work. Katie informed Joel that there was no time to test controls, so she instructed him as to the proper procedures for proving the mathematical accuracy of the accounting journals and ledgers and tying the totals to the financial statements. No footnotes or other supplemental disclosures accompanied the financial statements, and there were no prior-year financial statements to be used as a basis of comparison, which helped expedite the audit process.
While Joel was busy with the mathematical tie-ins, Katie analyzed the company’s sales and inventories because these were the most significant revenue and asset accounts. For sales, Katie reviewed the monthly sales reports and learned that several large contracts had been accounted for on the percentage of completion method. Although she wasn’t sure about the propriety of the profits recognized, Katie held a series of discussions with Traber’s controller, who assured Katie that the profits had been recorded in accordance with generally accepted accounting principles.
For inventories, Katie observed the items in the retail store, noting the reasonableness of their descriptions and saleable condition. She was not present when Traber Electronics conducted its annual physical count of the inventory. She did not examine the inventory at the company’s warehouse because it represented less than half of the value of the asset account.
One week before the deadline, Makins & Howell provided its standard audit report, which included an unqualified opinion on Traber’s financial statements.
Required:
Refer to each of the 10 GAAS and indicate how the actions of Makins & Howell or its employees resulted in violations of these standards.
Click here for the solution: Traber Electronics is a small privately owned retailer of electronic equipment and household appliances
Katie Kammins, CPA, was recently promoted to in-charge auditor for Makins & Howell and was assigned to the Traber audit along with Joel Misten, the firm’s university intern. Prior to her assignment to the Traber audit, all of Katie’s audit experience was in the health-care industry. Because most of Katie’s health-care clients had June 30 year ends, Katie was available in October to work on the Traber engagement.
Katie and Joel got right to work. Katie informed Joel that there was no time to test controls, so she instructed him as to the proper procedures for proving the mathematical accuracy of the accounting journals and ledgers and tying the totals to the financial statements. No footnotes or other supplemental disclosures accompanied the financial statements, and there were no prior-year financial statements to be used as a basis of comparison, which helped expedite the audit process.
While Joel was busy with the mathematical tie-ins, Katie analyzed the company’s sales and inventories because these were the most significant revenue and asset accounts. For sales, Katie reviewed the monthly sales reports and learned that several large contracts had been accounted for on the percentage of completion method. Although she wasn’t sure about the propriety of the profits recognized, Katie held a series of discussions with Traber’s controller, who assured Katie that the profits had been recorded in accordance with generally accepted accounting principles.
For inventories, Katie observed the items in the retail store, noting the reasonableness of their descriptions and saleable condition. She was not present when Traber Electronics conducted its annual physical count of the inventory. She did not examine the inventory at the company’s warehouse because it represented less than half of the value of the asset account.
One week before the deadline, Makins & Howell provided its standard audit report, which included an unqualified opinion on Traber’s financial statements.
Required:
Refer to each of the 10 GAAS and indicate how the actions of Makins & Howell or its employees resulted in violations of these standards.
Click here for the solution: Traber Electronics is a small privately owned retailer of electronic equipment and household appliances
Saturday, July 11, 2015
Trimble Company sells an electronic toy for $40
Trimble Company sells an electronic toy for $40. The variable cost is $24 per unit and the fixed cost is $32,000 per year. Management is considering the following changes:
Alternative #1
Lease a new packaging machine for $4,000 per year, which will reduce variable cost by $1 per unit.
Alternative #2
Increase selling price 10 percent to counteract an expected 25 percent increase in fixed cost.
Alternative #3
Reduce fixed cost by 25 percent by moving to a lower rent location. This would have the effect of increasing variable costs by 10 percent.
Required:
Consider and answer each of the following questions independently:
Round calculations to the nearest unit
(a) Determine the current break-even point in units and dollars.
(b) Determine the expected profit assuming alternative #1 and sales of 3,200 units.
(c) Determine the break-even point in units and dollars assuming alternative #2.
(d) Determine the break-even point required in units and dollars assuming alternative #3.
(e) Determine the volume of sales required to earn $23,600 assuming alternative #3.
Click here for the solution: Trimble Company sells an electronic toy for $40
Alternative #1
Lease a new packaging machine for $4,000 per year, which will reduce variable cost by $1 per unit.
Alternative #2
Increase selling price 10 percent to counteract an expected 25 percent increase in fixed cost.
Alternative #3
Reduce fixed cost by 25 percent by moving to a lower rent location. This would have the effect of increasing variable costs by 10 percent.
Required:
Consider and answer each of the following questions independently:
Round calculations to the nearest unit
(a) Determine the current break-even point in units and dollars.
(b) Determine the expected profit assuming alternative #1 and sales of 3,200 units.
(c) Determine the break-even point in units and dollars assuming alternative #2.
(d) Determine the break-even point required in units and dollars assuming alternative #3.
(e) Determine the volume of sales required to earn $23,600 assuming alternative #3.
Click here for the solution: Trimble Company sells an electronic toy for $40
Tuesday, July 7, 2015
Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program
PROBLEM 8-1. Determining the Profit-Maximizing Price [LO 1] Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program. The cable program's fee for selling the item is 20% of revenue. For this fee, the program will sell the calendar over six 10-minute segments in September.
Spencer's fixed costs of producing the calendar are $150,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. Production time will be less than three weeks. Variable production costs are $25.00 per unit. In addition, it will cost approximately $5.00 per unit to ship the calendars to customers.
Marsha Andersen, a product manager at Spencer, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:
Price: Quantity:
$79.99 15,000
$69.99 20,000
$59.99 30,000
$49.99 45,000
$39.99 65,000
Required:
a) Calculate expected profit for each price.
b) Which price maximizes company profit.
Click here for the solution: Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program
Spencer's fixed costs of producing the calendar are $150,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. Production time will be less than three weeks. Variable production costs are $25.00 per unit. In addition, it will cost approximately $5.00 per unit to ship the calendars to customers.
Marsha Andersen, a product manager at Spencer, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:
Price: Quantity:
$79.99 15,000
$69.99 20,000
$59.99 30,000
$49.99 45,000
$39.99 65,000
Required:
a) Calculate expected profit for each price.
b) Which price maximizes company profit.
Click here for the solution: Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program
Saturday, June 27, 2015
(ACC 349 Week 4) Technology Plus manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners
ACC 349 Week 4
BYP 6-2 (BYP6-2) Technology Plus manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products are sold as sets, and others are sold individually. Products are studied as to their sales potential, and then cost estimates are made. The Engineering Department develops production plans, and then production begins. The company has generally had very successful product introductions. Only two products introduced by the company have been discontinued.
AND SO ON
Instructions
(a) What is the difference in profit under each of the alternatives if the clocks are to be sold for $14.50 each to Kmart?
(b) What are the most important nonfinancial factors that Technology Plus should consider when making this decision?
(c) What do you think Technology Plus should do in regard to the Kmart order? What should it do in regard to continuing to manufacture the multi-alarm alarm clocks?
Click here for the solution: ACC 349 Week 4 Technology Plus manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners
BYP 6-2 (BYP6-2) Technology Plus manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products are sold as sets, and others are sold individually. Products are studied as to their sales potential, and then cost estimates are made. The Engineering Department develops production plans, and then production begins. The company has generally had very successful product introductions. Only two products introduced by the company have been discontinued.
AND SO ON
Instructions
(a) What is the difference in profit under each of the alternatives if the clocks are to be sold for $14.50 each to Kmart?
(b) What are the most important nonfinancial factors that Technology Plus should consider when making this decision?
(c) What do you think Technology Plus should do in regard to the Kmart order? What should it do in regard to continuing to manufacture the multi-alarm alarm clocks?
Click here for the solution: ACC 349 Week 4 Technology Plus manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners
Saturday, June 20, 2015
(Disclosures Required in Various Situations) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems
Case 24-2 (CA24-2) (Disclosures Required in Various Situations) Rem Inc.
produces electronic components for sale to manufacturers of radios,
television sets, and digital sound systems. In connection with her
examination of Rem’s financial statements for the year ended December
31, 2007, Maggie Zeen, CPA, completed field work 2 weeks ago. Ms. Zeen
now is evaluating the significance of the following items prior to
preparing her auditor’s report. Except as noted, none of these items
have been disclosed in the financial statements or notes.
Item 1
A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2007, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2007.
Item 2
Recently Rem interrupted its policy of paying cash dividends quarterly to its stockholders. Dividends were paid regularly through 2006, discontinued for all of 2007 to finance purchase of equipment for the company’s new plant, and resumed in the first quarter of 2008. In the annual report dividend policy is to be discussed in the president’s letter to stockholders.
Item 3
A major electronics firm has introduced a line of products that will compete directly with Rem’s primary line, now being produced in the specially designed new plant. Because of manufacturing innovations, the competitor’s line will be of comparable quality but priced 50% below Rem’s line. The competitor announced its new line during the week following completion of field work. Ms. Zeen read the announcement in the newspaper and discussed the situation by telephone with Rem executives. Rem will meet the lower prices that are high enough to cover variable manufacturing and selling expenses but will permit recovery of only a portion of fixed costs.
Item 4
The company’s new manufacturing plant building, which cost $2,400,000 and has an estimated life of 25 years, is leased from Ancient National Bank at an annual rental of $600,000. The company is obligated to pay property taxes, insurance, and maintenance. At the conclusion of its 10-year noncancellable lease, the company has the option of purchasing the property for $1. In Rem’s income statement the rental payment is reported on a separate line.
Instructions
For each of the items above discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered.)
Click here for the solution: (Disclosures Required in Various Situations) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems
Item 1
A 10-year loan agreement, which the company entered into 3 years ago, provides that dividend payments may not exceed net income earned after taxes subsequent to the date of the agreement. The balance of retained earnings at the date of the loan agreement was $420,000. From that date through December 31, 2007, net income after taxes has totaled $570,000 and cash dividends have totaled $320,000. On the basis of these data, the staff auditor assigned to this review concluded that there was no retained earnings restriction at December 31, 2007.
Item 2
Recently Rem interrupted its policy of paying cash dividends quarterly to its stockholders. Dividends were paid regularly through 2006, discontinued for all of 2007 to finance purchase of equipment for the company’s new plant, and resumed in the first quarter of 2008. In the annual report dividend policy is to be discussed in the president’s letter to stockholders.
Item 3
A major electronics firm has introduced a line of products that will compete directly with Rem’s primary line, now being produced in the specially designed new plant. Because of manufacturing innovations, the competitor’s line will be of comparable quality but priced 50% below Rem’s line. The competitor announced its new line during the week following completion of field work. Ms. Zeen read the announcement in the newspaper and discussed the situation by telephone with Rem executives. Rem will meet the lower prices that are high enough to cover variable manufacturing and selling expenses but will permit recovery of only a portion of fixed costs.
Item 4
The company’s new manufacturing plant building, which cost $2,400,000 and has an estimated life of 25 years, is leased from Ancient National Bank at an annual rental of $600,000. The company is obligated to pay property taxes, insurance, and maintenance. At the conclusion of its 10-year noncancellable lease, the company has the option of purchasing the property for $1. In Rem’s income statement the rental payment is reported on a separate line.
Instructions
For each of the items above discuss any additional disclosures in the financial statements and notes that the auditor should recommend to her client. (The cumulative effect of the four items should not be considered.)
Click here for the solution: (Disclosures Required in Various Situations) Rem Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems
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