DB Company Ltd. Leased a patent for the manufacture of radio components from JK DevelopersLtd. On 1 January 2023 for a ten-year period at a loyalty of Sh.50 per component manufacturedand sold.Minimum rent was agreed at Sh.4,000,000 per annum and loyalties for each year were paid on 15February of the following year. Short workings arising in any year were recoverable only withinthe following two years of operation.The number of components manufactured and sold by each company in each of the five yearsended 31 December 2023 were as follows.YearᎠᏴCompany Ltd.Number of unitsNumber of sold201748,00046,000201862,00060,000201972,00066,000202084,00082,000202190,00092,000Required:Prepare the following accounts in the books of DB Company Ltd. For each of the five years ended31 December 2023:Page 1 of 3(a) Royalties payable account(5 marks) ེཌུ(b)Short workings recoverable(5 marks)(c)Royalties receivable account(5 marks)(d)Profit & Loss account(5 marks)

Part 2: Explanation(a) Royalties payable account:Step 1: Calculate the total number of units…

Answered: DB Company Ltd. Leased a patent for the…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 63P

See similar textbooks

Similar questions

On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele paid shipping of $1,200, paid installation fees of $2,750, pays annual maintenance cost of $250, and received a 10% discount on sales price. Determine the acquisition cost of the equipment.
On January 1, 2024, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 5%.The contract calls for four rent payments of $43,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $363,000 and was expected to have a useful life of 6 years with no residual value. Both firms record amortization and depreciation semi-annually. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare the appropriate journal entries for the lessee from the beginning of the lease through the end of 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to the nearest whole dollar
On January 1, 2024, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $58,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $378,000 and was expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semi-annually. Required: Prepare the appropriate journal entries for the lessor (Jamison Leasing) from the beginning of the lease through the end of 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Record the first payment received by Jamison Leasing. Record the amortization or depreciation expense for Jamison Leasing. Record the second payment received by Jamison Leasing.…
Christina Co. has a factory equipment with a carrying amount of P700,000 and has a remaining useful life of 7 years. On January 1, 2020, Christina agreed to an exchange transaction with Kat & Inc. to transfer the equipment to the latter. The transfer satisfied the requirements of PFRS 15 to be a sale and Christina immediately leased it back for a lease term equal to the remaining life of the equipment. The sales price amounted to P500,000 while annual rental payable at the end of each year is P100,000 for an implicit rate of 10%. Selling price is equal to fair value. How much loss shall Christina recognize in relation to the sale and leaseback transaction? a. 681,578.63 b. 200,000 c. 194,736.75 d. 5,263.25
Brilliant Company sold a franchise to sell its products for P5,000,000 on January 1, 2021. The initial fee is payable P500,000 upon signing of the contract and the balance in 5 equal installments every December 31, evidenced by a 12% promissory note. The agreement provides that the franchisor will assist in the location of site, supervision of the building construction, project study or market survey, assistance in the acquisition of facilities, training and management of personnel, quality control, advertising and promotion. It was also agreed that the franchisee will pay a royalty fee equal to 5% of its average sales every calendar year. The franchise outlet was opened on May 1, 2021 and the average monthly sales of the franchisee is P100,000. The franchisor has incurred P1,500,000 related to the services required by the contract. 1. How much is the Initial Franchise Fee Revenue to be recognized in 2021? 2. How much is the Continuing Franchise Fee Revenue to be recognized in 2021? 3.…
On January 1. 2024, Ghosh Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31,2027 , at which time possession of the leased asset will revert back to Ghosh. - The equipment cost Ghosh$960,000and has an expected useful life of five years. - Ghosh expects the residual value at December 31, 2027, will be$304,000. - Negotiations led to the lessee guaranteeing a$344,000residual value - Equal payments under the finance/sales-type lease are$204,000and are due on December 31 of each year with the first payment being made on December 31, 2024. - Karrier is aware that Ghosh used a4%interest rate when calculating lease payments. Note: Use tables, Excel, or a financial calculator. (EV of \$1. PV of \$1. EVA of$1, PVA of S1. FVAD of$1and PVAD of S1) Required: 1. Prepare the appropriate entries for both Karrier and Ghosh on January 1, 2024, to record the lease. 2. Prepare all appropriate entries for both Karrier and Ghosh on December 31, 2024,…
On January 1, 2018, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $46,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $366,000 and was expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semi-annually. Required:Prepare the appropriate journal entries for the lessor (Jamison Leasing) from the beginning of the lease through the end of 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)
On April 1,2021, Red Company purchased a franchise for P3,125,000. In addition, the franchise contract stipulates that Red shall pay to the franchisor, 5% of its sales exceeding P5,000,000, payable at the end of the month following the end of every quarter. For the nine months ended Dec. 31, 2021, Red company's sales amounts to P8,500,000. The estimated useful life of the franchise is 10 years. It is the company's policy to amortize to the nearest month. a. How much is the amortization expense for the year 2021? b. How much is the franchise fee expense for the year 2021?
On 1 January 2022 (the contract date), Furniture Ltd sold R1 200 000 worth offurniture to a new housing development in Centurion. Furniture Ltd immediatelycredited their sales revenue with the R1 200 000. Included in the sales contract, wasa complementary servicing arrangement in which Furniture Ltd would provide thecustomer with annual servicing of the furniture (in case of any breakages ormanufacturing faults) for a period of three years from the date of the contract.The normal selling price of the furniture without any annual servicing is R1 400 000.The normal price charged to customers for annual servicing is R14 000.REQUIRED:Calculate the amount of revenue that Furniture Ltd should recognise, for thefinancial year end of 30 June 2022, with respect to the transaction above.Ignore the time value of money and VAT.
On January 1, 2021, Central Industries leased a high-performance conveyer to Dynamic Company for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Central. The equipment cost Central $1,912,000 and has an expected useful life of five years. Central expects the residual value at December 31, 2025, will be $600,000. Negotiations led to the lessee guaranteeing a $680,000 residual value.Equal payments under the finance/sales-type lease are $400,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Dynamic is aware that Central used a 5% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. Prepare the appropriate journal entries for both Dynamic and Central on January 1, 2021, to record the lease.2. Prepare all appropriate journal entries for both Dynamic and Central…

SEE MORE QUESTIONS

Recommended textbooks for you

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

Intermediate Accounting: Reporting And Analysis

Accounting

ISBN:

9781337788281

Author:

James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:

Cengage Learning

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Business Its Legal Ethical & Global Environment

Accounting

ISBN:

9781305224414

Author:

JENNINGS

Publisher:

Cengage

SEE MORE TEXTBOOKS