into a short forward contract for 1,000 tons of potato at a price of P12,250 to be exercised one year from now. The current market price on the contract date is P12,000 per ton. On the agreed delivery, the price increased to P12, 300. What is the gain/(loss) a
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ABC Corporation entered into a short forward contract for 1,000 tons of potato at a price of P12,250 to be exercised one year from now. The current market price on the contract date is P12,000 per ton. On the agreed delivery, the price increased to P12, 300. What is the gain/(loss) attributable to this contract?
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- 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.ABC entered into a long forward contract for 5,000 sacks of rice. The total agreed price is P4,000,000. On the agreed date, the price of a sack is P775 Compute the net gain or (loss)
- ABC Sugar Refinery Inc. agreed to buy 2,000 sacks of raw sugar at a price of P1,100 per ton six months from now. The market price of raw sugar per sack is P1,050 on the agreement date and P1,175 on the transaction date Compute the net gain or (loss)XYZ Corp. entered into a long forward contract for 125 pieces of 1-ounce silver at a fixed price of P1,320 to be delivered one year from now. Its current price is P1,330. After one year, the price of silver was P1,340. What is the purchase price that XYZ will be paying for its order?Gilroy Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,140. The freight and installation costs for the equipment are $660. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Gilroy can lease the equipment from a domestic supplier for $1,540 per year for four years, with no additional costs. Prepare a differential analysis dated December 11 to determine whether Gilroy should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential Analysis Lease Machine (Alt. 1) or Buy Machine (Alt. 2) December 11 Lease Machine(Alternative 1) Buy Machine(Alternative 2) Differential Effecton Income(Alternative 2) Revenues $0 $0 $0 Costs:…
- Canada M. manufactures special equipment with an estimated economic life of 12 years and leases it to Phranka for a period of 10 years commencing January 1, 2021. The unguaranteed residual value at the end of the lease term is estimated to be $15,000. Phranka will make annual payments of $25,000 at the beginning of each year and pay for all maintenance and insurance costs. Canada M. incurred costs of $105,000 in manufacturing the equipment but is looking to make a profit on the sale of equipment. In addition, Phranka incurred $7000 in costs tied to negotiating and closing the lease. Canada M. has determined that the collectability of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%. Phranka has a borrowing rate of 8%. How should Canada M. classify this lease transaction? a. Classify as an operating lease. b. Classify as a capital, sales type lease. c. Classify as a capital, direct finance type lease.…Orange Corp enters into a non-cancellable contract with Coles Ltd to supply 200,000 units of goods on an annual basis for $3 per unit for three years. At the beginning of the third year, Orange and Coles agree to renegotiate the contract because the market price for the goods has declined. Under the modified agreement, the parties agree to extend the contract for an additional year (same fixed annual quantity) and reduce the price per unit to $2 for the remaining 400,000 units of goods to be delivered. As part of the contract modification, Orange Corp also agrees to make a non-refundable payment of $20,000 to Coles Ltd to compensate for the changes it needs to make to its shelving to accommodate the goods purchased from Orange Corp. There is no dispute between the parties regarding prior performance, and both parties have performed according to the terms of the contract. Orange determines that the remaining goods are distinct from those previously delivered and concludes that the…Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?
- Grouper Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $260,015, and its unguaranteed residual value at the end of the lease term is estimated to be $20,500. National will pay annual payments of $37,300 at the beginning of each year. Grouper incurred costs of $195,000 in manufacturing the equipment and $4,100 in sales commissions in closing the lease. Grouper has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%.Carr Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,900. The freight and installation costs for the equipment are $515. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Carr can lease the equipment from a domestic supplier for $1,750 per year for four years, with no additional costs. Required: A. Prepare a differential analysis dated August 4 to determine whether Carr should lease (Alternative 1) or purchase (Alternative 2) the equipment. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required. (Hint: This is a “lease or buy” decision, which must be analyzed from the…Bridgeport Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Indigo Airlines for a period of 10 years. The normal selling price of the equipment is $281,987, and its unguaranteed residual value at the end of the lease term is estimated to be $21,100. Indigo will pay annual payments of $42,000 at the beginning of each year. Bridgeport incurred costs of $193,400 in manufacturing the equipment and $3,800 in sales commissions in closing the lease. Bridgeport has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Indigo Airlines has an incremental borrowing rate of 11%.
