P21-1 Determining Type of Lease and Subsequent Accounting
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.
REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.
Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
Showing posts with label five. Show all posts
Showing posts with label five. Show all posts
Tuesday, April 12, 2016
Tuesday, November 10, 2015
Identify the five components that comprise pension expense
Chapter 20: Question 10
Identify the five components that comprise pension expense. Briefly explain the nature of each component.
Click here for the solution: Identify the five components that comprise pension expense
Identify the five components that comprise pension expense. Briefly explain the nature of each component.
Click here for the solution: Identify the five components that comprise pension expense
Decker Company has five products in its inventory
P 9-1 Lower of cost or market
Decker Company has five products in its inventory. Information about the December 31, 2011, inventory follows.
Unit Replacement Selling
Product/ Quantity/ Unit Cost /unit replacement Cost/ unit selling Price_____
A /1,000 /$10/ $12 $16
B /800 /15/ 11/ 18
C/ 600 /3/ 2/ 8
D/ 200/ 7 /4/ 6
E /600 /14 /12 /13
The selling cost for each product consists of a 15 percent sales commission. The normal profit percentage for each product is 40 percent of the selling price.
Required:
1. Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to individual products.
2. Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to the entire inventory. Also, assuming that Decker recognizes an inventory write-down as a separate income statement item, determine the amount of the loss.
Click here for the solution: Decker Company has five products in its inventory
Decker Company has five products in its inventory. Information about the December 31, 2011, inventory follows.
Unit Replacement Selling
Product/ Quantity/ Unit Cost /unit replacement Cost/ unit selling Price_____
A /1,000 /$10/ $12 $16
B /800 /15/ 11/ 18
C/ 600 /3/ 2/ 8
D/ 200/ 7 /4/ 6
E /600 /14 /12 /13
The selling cost for each product consists of a 15 percent sales commission. The normal profit percentage for each product is 40 percent of the selling price.
Required:
1. Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to individual products.
2. Determine the balance sheet inventory carrying value at December 31, 2011, assuming the LCM rule is applied to the entire inventory. Also, assuming that Decker recognizes an inventory write-down as a separate income statement item, determine the amount of the loss.
Click here for the solution: Decker Company has five products in its inventory
Sunday, September 13, 2015
Fraser Company will need a new warehouse in five years
Fraser Company will need a new warehouse in five years. The warehouse will cost $500,000 to build.
Required:
What lump-sum amount should the company invest now to have the $500,000 available at the end of the five-year period? Assume that the company can invest money at:
1. Ten percent.
2. Fourteen percent.
Click here for the solution: Fraser Company will need a new warehouse in five years
Required:
What lump-sum amount should the company invest now to have the $500,000 available at the end of the five-year period? Assume that the company can invest money at:
1. Ten percent.
2. Fourteen percent.
Click here for the solution: Fraser Company will need a new warehouse in five years
Tuesday, September 8, 2015
For each of these five separate cases, identify the principle of internal control that is violated
ACC 225 Week 8
Problems 8-1B
For each of these five separate cases, identify the principle of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.
1. Latoya Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latoya has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.
2. Lake Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.
3. X2U Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.
4. The owner of Super-Aid uses a check protector to perforate checks, making it difficult for anyone to alter the amount of the check. The check protector sits on the owner’s desk in an office
that contains company checks and is often unlocked.
5. LeAnn Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.
Click here for the solution: For each of these five separate cases, identify the principle of internal control that is violated
Problems 8-1B
For each of these five separate cases, identify the principle of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.
1. Latoya Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latoya has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.
2. Lake Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.
3. X2U Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.
4. The owner of Super-Aid uses a check protector to perforate checks, making it difficult for anyone to alter the amount of the check. The check protector sits on the owner’s desk in an office
that contains company checks and is often unlocked.
5. LeAnn Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.
Click here for the solution: For each of these five separate cases, identify the principle of internal control that is violated
Wednesday, September 2, 2015
The Winthrop Company is constructing a five-year plan
The Winthrop Company is constructing a five-year plan. The firm’s ACP is currently 90 days, while its inventory turnover ratio is 3 X based on COGS. The company has forecast aggressive revenue growth along with efficiency improvements in manufacturing and credit and collections as follows. (Year 0 is the current year)
Year
0 1 2 3 4 5
Revenue ($000) $50.0 $57.5 $66.0 $76.0 $87.5 $100.0
Cost ratio 60% 59% 58% 57% 56% 55%
ACP (days) 90 70 60 50 45 40
Inventory turnover 3X 4X 5X 6X 6.5X 7X
For each planned year:
a. Calculate the COGS.
b. Calculate the A/R balance at year end.
c. Calculate the inventory balance at year end.
Click here for the solution: The Winthrop Company is constructing a five-year plan
Year
0 1 2 3 4 5
Revenue ($000) $50.0 $57.5 $66.0 $76.0 $87.5 $100.0
Cost ratio 60% 59% 58% 57% 56% 55%
ACP (days) 90 70 60 50 45 40
Inventory turnover 3X 4X 5X 6X 6.5X 7X
For each planned year:
a. Calculate the COGS.
b. Calculate the A/R balance at year end.
c. Calculate the inventory balance at year end.
Click here for the solution: The Winthrop Company is constructing a five-year plan
Tuesday, August 4, 2015
List and briefly describe four of the five differences between managerial accounting and financial accounting
List and briefly describe four of the five differences between managerial accounting and financial accounting.
Click here for the solution: List and briefly describe four of the five differences between managerial accounting and financial accounting.
Click here for the solution: List and briefly describe four of the five differences between managerial accounting and financial accounting.
Sunday, July 19, 2015
Lancers Inc. is involved in five separate industries
Lancers Inc. is involved in five separate industries. The following information is available for each of the five industry segments.
Operating Segment Total Revenue Operating Profit (Loss) Identifiable Assets
A $140,000 $25,000 $240,000
B 40,000 8,000 11,000
C 26,000 (5,000) 36,000
D 190,000 (2,000) 49,000
E 2,000 500 15,000
$398,000 $26,500 $361,000
Instructions
Determine which of the operating segments are reportable based on the:
(a) Revenue test.
(b) Operating profit (loss) test.
(c) Identifiable assets test.
Click here for the solution: Lancers Inc. is involved in five separate industries
Operating Segment Total Revenue Operating Profit (Loss) Identifiable Assets
A $140,000 $25,000 $240,000
B 40,000 8,000 11,000
C 26,000 (5,000) 36,000
D 190,000 (2,000) 49,000
E 2,000 500 15,000
$398,000 $26,500 $361,000
Instructions
Determine which of the operating segments are reportable based on the:
(a) Revenue test.
(b) Operating profit (loss) test.
(c) Identifiable assets test.
Click here for the solution: Lancers Inc. is involved in five separate industries
Wednesday, July 15, 2015
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains
P 12–15: Great Southern Furniture
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees along with the small crew of Great Southern employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture. The 500-room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated cost per hour is $22. Upon completing the job, the crew reports they had total wages of $49,693 for 2,170 hours worked.
Required:
Write a report evaluating the performance of the crew at the Hyatt in Tampa.
Click here for the solution: Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees along with the small crew of Great Southern employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture. The 500-room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated cost per hour is $22. Upon completing the job, the crew reports they had total wages of $49,693 for 2,170 hours worked.
Required:
Write a report evaluating the performance of the crew at the Hyatt in Tampa.
Click here for the solution: Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains
Tuesday, July 7, 2015
(Present Value Analysis) James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals
PROBLEM 9-1. Present Value Analysis [LO 1, 5] James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals. The contract offer called for an immediate signing bonus of $5,000,000 and annual payments of $3,000,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $22,000,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.
Year 1 $ 3,000,000
Year 2 3,100,000
Year 3 3,200,000
Year 4 3,300,000
Year 5 3,400,000
Year 5 balloon payment 6,000,000
Total $22,000,000
Required
Suppose you are Hardy’s agent and you wish to evaluate the two contracts using a required rate of return of 12 percent. In present value terms, how much better is the second contract?
Click here for the solution: (Present Value Analysis) James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals
Year 1 $ 3,000,000
Year 2 3,100,000
Year 3 3,200,000
Year 4 3,300,000
Year 5 3,400,000
Year 5 balloon payment 6,000,000
Total $22,000,000
Required
Suppose you are Hardy’s agent and you wish to evaluate the two contracts using a required rate of return of 12 percent. In present value terms, how much better is the second contract?
Click here for the solution: (Present Value Analysis) James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals
Monday, June 29, 2015
Anna Bellatorre, Inc. manufactures five models of kitchen appliances at its Mesa plant
Anna Bellatorre, Inc. manufactures five
models of kitchen appliances at its Mesa plant. The company is
installing activity-based costing and has identified the following
activities performed at its Mesa plant.
1. Designing new models.
2. Purchasing raw materials and parts.
3. Storing and managing inventory.
4. Receiving and inspecting raw materials and parts.
5. Interviewing and hiring new personnel.
6. Machine forming sheet steel into appliance parts.
7. Manually assembling parts into appliances.
8. Training all employees of the company.
9. Insuring all tangible fixed assets.
10. Supervising production.
11. Maintaining and repairing machinery and equipment.
12. Painting and packaging finished appliances.
Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Anna Bellatorre, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products.
Click here for the solution: Anna Bellatorre, Inc. manufactures five models of kitchen appliances at its Mesa plant
1. Designing new models.
2. Purchasing raw materials and parts.
3. Storing and managing inventory.
4. Receiving and inspecting raw materials and parts.
5. Interviewing and hiring new personnel.
6. Machine forming sheet steel into appliance parts.
7. Manually assembling parts into appliances.
8. Training all employees of the company.
9. Insuring all tangible fixed assets.
10. Supervising production.
11. Maintaining and repairing machinery and equipment.
12. Painting and packaging finished appliances.
Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Anna Bellatorre, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products.
Instructions
Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Anna Bellatorre's five products.
Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Anna Bellatorre's five products.
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