E22-9 (Error and Change in Estimate-Depreciation) Joy Cunningham Co. purchased a machine on January 1, 2005 for $550,000. At that time it was estimated that the machine would have a 10 year life and no salvage value. On December 31, 2008, the firm’s accountant found that the entry for depreciation expense had been omitted in 2006. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2008. At present the company uses the sum of the year’s digits method for depreciating equipment.
Instructions
Prepare the general journal entries that should be made at December, 31 2008 to record these events. (Ignore the effects)
Click here for the solution: Joy Cunningham Co. purchased a machine on January 1, 2005 for $550,000
Showing posts with label machine. Show all posts
Showing posts with label machine. Show all posts
Wednesday, November 11, 2015
Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008
E21-6 (Lessor Entries; Sales Type Lease) Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008. The lease is for an 8 year period and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 2008. Crosley had purchased the machine during 2007 for $160,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Crosley. Crosley set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 yrs with no residual value and reverts to Crosley at the termination of the lease.
Instructions
Prepare all necessary journal entries for Crosley for 2008.
Click here for the solution: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008
Instructions
Prepare all necessary journal entries for Crosley for 2008.
Click here for the solution: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008
Monday, October 26, 2015
Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
ACC 560 Week 2 Assignment
E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
Wednesday, October 7, 2015
Wilkins Food Products, Inc. acquired a packaging machine from Lawrence Specialists Corporation
E 20-21 Error in amortization schedule
Wilkins Food Products, Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2009. In payment for the machine Wilkins issued a three-year installment note to be paid in three equal payments at the end of each year. The payments include interest at the rate of 10%. Lawrence made a conceptual error in preparing the amortization schedule which Wilkins failed to discover until 2011. As a result of the error, Wilkins understated interest expense by $45,000 in 2009 and $40,000 in 2010.
Required:
1. Determine which accounts are incorrect as a result of these errors at January 1, 2011, before any adjustments. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the error.
3. What other step(s) would be taken in connection with the error?
Click here for the solution: Wilkins Food Products, Inc. acquired a packaging machine from Lawrence Specialists Corporation
Wilkins Food Products, Inc. acquired a packaging machine from Lawrence Specialists Corporation. Lawrence completed construction of the machine on January 1, 2009. In payment for the machine Wilkins issued a three-year installment note to be paid in three equal payments at the end of each year. The payments include interest at the rate of 10%. Lawrence made a conceptual error in preparing the amortization schedule which Wilkins failed to discover until 2011. As a result of the error, Wilkins understated interest expense by $45,000 in 2009 and $40,000 in 2010.
Required:
1. Determine which accounts are incorrect as a result of these errors at January 1, 2011, before any adjustments. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the error.
3. What other step(s) would be taken in connection with the error?
Click here for the solution: Wilkins Food Products, Inc. acquired a packaging machine from Lawrence Specialists Corporation
American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation
E 14-18 Installment note; amortization schedule
American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2011. In payment for the $4 million machine, American Food Services issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%.
Required:
1. Prepare the journal entry for American Food Services' purchase of the machine on January 1, 2011.
2. Prepare an amortization schedule for the four-year term of the installment note.
3. Prepare the journal entry for the first installment payment on December 31, 2011.
4. Prepare the journal entry for the third installment payment on December 31, 2013.
Click here for the solution: American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation
American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2011. In payment for the $4 million machine, American Food Services issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%.
Required:
1. Prepare the journal entry for American Food Services' purchase of the machine on January 1, 2011.
2. Prepare an amortization schedule for the four-year term of the installment note.
3. Prepare the journal entry for the first installment payment on December 31, 2011.
4. Prepare the journal entry for the third installment payment on December 31, 2013.
Click here for the solution: American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation
Sunday, October 4, 2015
Flint Tooling Company is considering replacing a machine that has been used in its factory for two years
PR 9-2A Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:
OLD MACHINE
Cost of machine, eight year life $48,000
Annual depreciation (straight-line) 6,000
Annual manufacturing costs, excluding depreciation 14,500
Annual nonmanufacturing operating expenses 2,900
Annual revenue 29,600
Current estimated selling price of the machine 18,000
NEW MACHINE
Cost of the machine, six year life $58,500
Annual depreciation (straight-line) 9,750
Estimated annual manufacturing costs, exclusive of depreciation 5,200
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Instructions
1.Prepare a differential analysis report as of May 22, 2010, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired.
2.List other factors that should be considered before a final decision is reached.
Click here for the solution: Flint Tooling Company is considering replacing a machine that has been used in its factory for two years
OLD MACHINE
Cost of machine, eight year life $48,000
Annual depreciation (straight-line) 6,000
Annual manufacturing costs, excluding depreciation 14,500
Annual nonmanufacturing operating expenses 2,900
Annual revenue 29,600
Current estimated selling price of the machine 18,000
NEW MACHINE
Cost of the machine, six year life $58,500
Annual depreciation (straight-line) 9,750
Estimated annual manufacturing costs, exclusive of depreciation 5,200
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Instructions
1.Prepare a differential analysis report as of May 22, 2010, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired.
2.List other factors that should be considered before a final decision is reached.
Click here for the solution: Flint Tooling Company is considering replacing a machine that has been used in its factory for two years
Sunday, September 20, 2015
A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is eight years
A machine cost $500,000 on April 1, 2010. Its estimated salvage value is $50,000 and its expected life is eight years.
Instructions:
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used
a) straight-line for 2010
b) Double-declining balance for 2011
c) Sum-of-the-years digits for 2011
Click here for the solution: A machine cost $500,000 on April 1, 2010
Instructions:
Calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used
a) straight-line for 2010
b) Double-declining balance for 2011
c) Sum-of-the-years digits for 2011
Click here for the solution: A machine cost $500,000 on April 1, 2010
On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary
ADVANCE ACCOUNTING Multiple Choice
1. On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary, Scully Company, for $200,000. Scully adopted a four-year economic life, no residual value, and the sum-of-the-years'-digits method of depreciation for the machine. If correct working paper eliminations are prepared for Passey Corporation and subsidiary on November 30, 2007, the end of the fiscal year, Passey's net income to be included in consolidated net income is (disregarding income taxes): (Points : 1)
2. In the measurement of minority interest in net income of a partially owned subsidiary, the credit for Depreciation Expense¾Parent in the working paper elimination (in journal entry format) for intercompany gain in a depreciable plant asset is attributed to net income of: (Points : 1)
3. A material realized gain on a subsidiary's open-market acquisition of its parent company's outstanding bonds at a discount is displayed in the consolidated income statement as: (Points : 1)
4. The starting point for the computation of net cash provided by operating activities in a consolidated statement of cash flows (indirect method) for a parent company and its partially owned subsidiary is: (Points : 1)
5. The realized but unrecognized gain on extinguishment of debt resulting from a parent company's open-market acquisition of the subsidiary's outstanding bonds is recorded in subsequent journal entries by: (Points : 1)
6. In the preparation of a consolidated statement of cash flows, dividends declared and paid to minority shareholders of a subsidiary are: (Points : 1)
7. Included in a working paper elimination (in journal entry format) for intercompany sales of merchandise was a debit to Minority Interest in Net Assets of Subsidiary. This debit indicates that: (Points : 1)
8. Included in a working paper elimination (in journal entry format) for intercompany sales was a credit of $60,000 to Cost of Goods Sold¾Subsidiary. The credit indicates that, for the accounting period involved: (Points : 1)
9. In the installment acquisition of a controlling interest in a subsidiary, the Retained Earnings of Subsidiary/Investee ledger account is first credited in a journal entry of the parent company/investor to: (Points : 1)
10. Intercompany loans, operating leases of property, and rendering of services do not include an element of intercompany profit gain or loss for the consolidated entity because: (Points : 1)
Click here for the solution: On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary
1. On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary, Scully Company, for $200,000. Scully adopted a four-year economic life, no residual value, and the sum-of-the-years'-digits method of depreciation for the machine. If correct working paper eliminations are prepared for Passey Corporation and subsidiary on November 30, 2007, the end of the fiscal year, Passey's net income to be included in consolidated net income is (disregarding income taxes): (Points : 1)
2. In the measurement of minority interest in net income of a partially owned subsidiary, the credit for Depreciation Expense¾Parent in the working paper elimination (in journal entry format) for intercompany gain in a depreciable plant asset is attributed to net income of: (Points : 1)
3. A material realized gain on a subsidiary's open-market acquisition of its parent company's outstanding bonds at a discount is displayed in the consolidated income statement as: (Points : 1)
4. The starting point for the computation of net cash provided by operating activities in a consolidated statement of cash flows (indirect method) for a parent company and its partially owned subsidiary is: (Points : 1)
5. The realized but unrecognized gain on extinguishment of debt resulting from a parent company's open-market acquisition of the subsidiary's outstanding bonds is recorded in subsequent journal entries by: (Points : 1)
6. In the preparation of a consolidated statement of cash flows, dividends declared and paid to minority shareholders of a subsidiary are: (Points : 1)
7. Included in a working paper elimination (in journal entry format) for intercompany sales of merchandise was a debit to Minority Interest in Net Assets of Subsidiary. This debit indicates that: (Points : 1)
8. Included in a working paper elimination (in journal entry format) for intercompany sales was a credit of $60,000 to Cost of Goods Sold¾Subsidiary. The credit indicates that, for the accounting period involved: (Points : 1)
9. In the installment acquisition of a controlling interest in a subsidiary, the Retained Earnings of Subsidiary/Investee ledger account is first credited in a journal entry of the parent company/investor to: (Points : 1)
10. Intercompany loans, operating leases of property, and rendering of services do not include an element of intercompany profit gain or loss for the consolidated entity because: (Points : 1)
Click here for the solution: On December 1, 2006, Passey Corporation sold a machine with a carrying amount of $150,000 to its 80%-owned subsidiary
Monday, August 31, 2015
A machine was purchased two years ago for $120,000 and can be sold for $50,000 today
A machine was purchased two years ago for $120,000 and can be sold for $50,000 today. The machine has been depreciated using the MACRS 5-year recovery period and the firm pays 40 percent taxes on both ordinary income and capital gains. Find the firm's tax liability (benefit), if any.
Click here for the solution: A machine was purchased two years ago for $120,000 and can be sold for $50,000 today
Click here for the solution: A machine was purchased two years ago for $120,000 and can be sold for $50,000 today
Thursday, August 13, 2015
Herky Foods is considering acquisition of a new wrapping machine
Herky Foods is considering acquisition of a new wrapping machine. The initial investment is estimated at $1.25 million, and the machine will have a 5-year life with no salvage value. Using a 6% discount rate, determine the net present value (NPV) of the machine given its expected operating cash inflows shown in the following table. Based on the project's NPV, should Herky make this investment?
Year Cash Inflow
1 $400,000
2 375,000
3 3000,000
4 350,000
5 200,000
Click here for the solution: Herky Foods is considering acquisition of a new wrapping machine
Year Cash Inflow
1 $400,000
2 375,000
3 3000,000
4 350,000
5 200,000
Click here for the solution: Herky Foods is considering acquisition of a new wrapping machine
Tuesday, August 4, 2015
Birkenstock is considering an investment in a nylon-knitting machine
Birkenstock is considering an investment in a nylon-knitting machine. The machine requires an initial investment of $25,000, has a 5-year life, and has no residual value at the end of the 5 years. The company’s cost of capital is 12%. Known with less certainty are the actual after-tax cash inflows each of the 5 years. The company has estimated expected cash inflows for three scenarios: pessimistic, most likely, and optimistic. These expected cash outflows are listed on the following table. Calculate the range for the NPV given each scenario.
Expected cash inflows
Year Pessimistic Most likely Optimistic
1 $5,500 $8,000 $10,500
2 6.000 9,000 12,000
3 7,500 10,500 14,500
4 6,500 9,500 11,500
5 4,500 6,500 7,500
Click here for the solution: Birkenstock is considering an investment in a nylon-knitting machine
Expected cash inflows
Year Pessimistic Most likely Optimistic
1 $5,500 $8,000 $10,500
2 6.000 9,000 12,000
3 7,500 10,500 14,500
4 6,500 9,500 11,500
5 4,500 6,500 7,500
Click here for the solution: Birkenstock is considering an investment in a nylon-knitting machine
Sunday, July 19, 2015
Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour
Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour. Last year the company had actual overhead of $898,000 and 75,000 machine hours.
(a) Compute the amount of manufacturing overhead applied.
(b) Compute the amount of over/underapplied overhead.
(c) What is the disposition of the over/under applied overhead?
Click here for the solution: Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour
(a) Compute the amount of manufacturing overhead applied.
(b) Compute the amount of over/underapplied overhead.
(c) What is the disposition of the over/under applied overhead?
Click here for the solution: Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour
Tuesday, July 14, 2015
Castle Company is considering the purchase of a new machine
BYP 6-1 Castle Company is considering the purchase of a new machine. The invoice price of the machine is $125,000, freight charges are estimated to be $4,000, and installation costs are expected to be $6,000. Salvage value of the new equipment is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would have to be scrapped. Castle's accountant, Shaida Fang, has accumulated the following data regarding annual sales and expenses with and without the new machine.
Without the new machine, Castle can sell 12,000 units of product annually at a per unit selling price of $100. If the new machine is purchased, the number of units produced and sold would increase by 20%, and the selling price would remain the same.
The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old machine the gross profit rate will be 25% of sales, whereas the rate will be 30% of sales with the new machine.
Annual selling expenses are $180,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased.
Annual administrative expenses are expected to be $100,000 with the old machine, and $113,000 with the new machine.
The current book value of the existing machine is $36,000. Castle uses straight-line depreciation.
Click here for the solution: Castle Company is considering the purchase of a new machine
Without the new machine, Castle can sell 12,000 units of product annually at a per unit selling price of $100. If the new machine is purchased, the number of units produced and sold would increase by 20%, and the selling price would remain the same.
The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old machine the gross profit rate will be 25% of sales, whereas the rate will be 30% of sales with the new machine.
Annual selling expenses are $180,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased.
Annual administrative expenses are expected to be $100,000 with the old machine, and $113,000 with the new machine.
The current book value of the existing machine is $36,000. Castle uses straight-line depreciation.
Click here for the solution: Castle Company is considering the purchase of a new machine
Wednesday, July 8, 2015
Janes, Inc., is considering the purchase of a machine that would cost $430,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $47,000
(Ignore income taxes in this problem.) Janes, Inc., is considering the purchase of a machine that would cost $430,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $47,000. The machine would reduce labor and other costs by $109,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 6 years. The company requires a minimum pretax return of 17% on all investment projects.
Required: Determine the net present value of the project. Show your work!
Click here for the solution: Janes, Inc., is considering the purchase of a machine that would cost $430,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $47,000
Required: Determine the net present value of the project. Show your work!
Click here for the solution: Janes, Inc., is considering the purchase of a machine that would cost $430,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $47,000
Wednesday, June 24, 2015
(Lessee Entries, Capital lease with Unguaranteed Residual Value) On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine
Exercise 21-1 (E21-1) (Lessee Entries, Capital lease with Unguaranteed
Residual Value) On January 1, 2011, Adams Corporation signed a 5-year
non-cancelable lease for a machine. The terms of the lease called for
Adams to make annual payments of $ 9,968 at the beginning of each year,
starting 01/01/11. The machine has an estimated useful life of six years
and a $ 5,000 unguaranteed residual value. The machine reverts back to
the lessor at the end of the lease term. Adams uses the straight-line
method of depreciation for all of its plant assets. Adam's incremental
borrowing rate is 10%, and the Lessor's implicit rate is unknown.
Instructions:
(A.) What type of lease is this? Explain
(B.) Compute the present value of the minimum lease payments.
(C.) Prepare all necessary journal entries for Adams for this lease through January 1, 2012
Click here for the solution: (Lessee Entries, Capital lease with Unguaranteed Residual Value) On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine
Instructions:
(A.) What type of lease is this? Explain
(B.) Compute the present value of the minimum lease payments.
(C.) Prepare all necessary journal entries for Adams for this lease through January 1, 2012
Click here for the solution: (Lessee Entries, Capital lease with Unguaranteed Residual Value) On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine
(Lessor and Lessee Accounting and Disclosures) Sylvan Inc. entered into a noncancelable lease arrangement with Breton Leasing Corporation for a certain machine
Case 21-2 (CA21-2) (Lessor and Lessee Accounting and Disclosures) Sylvan
Inc. entered into a noncancelable lease arrangement with Breton Leasing
Corporation for a certain machine. Breton's primary business is
leasing; it is not a manufacturer or dealer. Sylvan will lease the
machine for a period of 3 years, which is 50% of the machine's economic
life. Breton will take possession of the machine at the end of the
initial 3-year lease and lease it to another, smaller company that does
not need the most current version of the machine. Sylvan does not
guarantee any residual value of the machine and will not purchase the
machine at the end of the lease term.
Sylvan's incremental borrowing rate is 10%, and the implicit rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Brenton. Using either rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Brenton. Using either rate, the present value of the minimum lease payments is between 90% and 100% of the fair value of the machine at the date of the lease agreement. Sylvan has agreed to pay all executor costs directly, and no allowance for the costs is included in the lease payments.
Brenton is reasonably certain that Sylvan will pay all lease payments, and because Sylvan has agreed to pay all executor cost, there are no important uncertainties regarding costs to be incurred by Breton. Assume that no indirect cost are involved.
Instructions:
(a) With respect to Sylvan (the lessee), answers the following.
(1) What type of lease has been entered into? Explain the reason for your reason.
(2) How should Sylvan compute the appropriate amount to be recorded for the else or asset acquired?
(3) What accounts will be created or affected by the transaction, and how will the lease or asst and other cost related to the transaction be matched with earnings.
(4) What disclosures must Sylvan make regarding the leased asset?
(b) With respect to Breton (the lessor). Answer the following:
(1) What type of leasing arrangement has been entered into? Explain the reason for your reason.
(2) How should the lease be recorded by Brenton, and how are the appropriate amounts determined?
(3) How should Breton determined the appropriate amount of earning to be recognized from each lease payment?
(4) What disclosures must Breton make regarding the lease?
Click here for the solution: (Lessor and Lessee Accounting and Disclosures) Sylvan Inc. entered into a noncancelable lease arrangement with Breton Leasing Corporation for a certain machine
Sylvan's incremental borrowing rate is 10%, and the implicit rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Brenton. Using either rate in the lease is 9%. Sylvan has no way of knowing the implicit rate used by Brenton. Using either rate, the present value of the minimum lease payments is between 90% and 100% of the fair value of the machine at the date of the lease agreement. Sylvan has agreed to pay all executor costs directly, and no allowance for the costs is included in the lease payments.
Brenton is reasonably certain that Sylvan will pay all lease payments, and because Sylvan has agreed to pay all executor cost, there are no important uncertainties regarding costs to be incurred by Breton. Assume that no indirect cost are involved.
Instructions:
(a) With respect to Sylvan (the lessee), answers the following.
(1) What type of lease has been entered into? Explain the reason for your reason.
(2) How should Sylvan compute the appropriate amount to be recorded for the else or asset acquired?
(3) What accounts will be created or affected by the transaction, and how will the lease or asst and other cost related to the transaction be matched with earnings.
(4) What disclosures must Sylvan make regarding the leased asset?
(b) With respect to Breton (the lessor). Answer the following:
(1) What type of leasing arrangement has been entered into? Explain the reason for your reason.
(2) How should the lease be recorded by Brenton, and how are the appropriate amounts determined?
(3) How should Breton determined the appropriate amount of earning to be recognized from each lease payment?
(4) What disclosures must Breton make regarding the lease?
Click here for the solution: (Lessor and Lessee Accounting and Disclosures) Sylvan Inc. entered into a noncancelable lease arrangement with Breton Leasing Corporation for a certain machine
Three different companies each purchased a machine on January 1, 2008, for $42,000
Problem 6-28 Determining the effect of depreciation expense on financial statements
Three different companies each purchased a machine on January 1, 2008, for $ 42,000. Each machine was expected to last five years or 200,000 hours. Salvage value was estimated to be $2,000. All three machines were operated for 50,000 hours in 2008, 55,000 hours in 2009, 40,000 hours in 2010, 44,000 hours in 2011, and 31,000 hours in 2012. Each of the three companies earned $ 30,000 of cash revenue during each of the five years. Company A uses straight- line depreciation, company B uses double- declining- balance depreciation, and company C uses units- of- production depreciation.
Required Answer each of the following questions. Ignore the effects of income taxes.
a. Which company will report the highest amount of net income for 2008?
b. Which company will report the lowest amount of net income for 2010?
c. Which company will report the highest book value on the December 31, 2010, balance sheet? d. Which company will report the highest amount of retained earnings on the December 31, 2011, balance sheet?
e. Which company will report the lowest amount of cash flow from operating activities on the 2010 statement of cash flows?
Click here for the solution: Three different companies each purchased a machine on January 1, 2008, for $42,000
Three different companies each purchased a machine on January 1, 2008, for $ 42,000. Each machine was expected to last five years or 200,000 hours. Salvage value was estimated to be $2,000. All three machines were operated for 50,000 hours in 2008, 55,000 hours in 2009, 40,000 hours in 2010, 44,000 hours in 2011, and 31,000 hours in 2012. Each of the three companies earned $ 30,000 of cash revenue during each of the five years. Company A uses straight- line depreciation, company B uses double- declining- balance depreciation, and company C uses units- of- production depreciation.
Required Answer each of the following questions. Ignore the effects of income taxes.
a. Which company will report the highest amount of net income for 2008?
b. Which company will report the lowest amount of net income for 2010?
c. Which company will report the highest book value on the December 31, 2010, balance sheet? d. Which company will report the highest amount of retained earnings on the December 31, 2011, balance sheet?
e. Which company will report the lowest amount of cash flow from operating activities on the 2010 statement of cash flows?
Click here for the solution: Three different companies each purchased a machine on January 1, 2008, for $42,000
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