Juliet Company is in the business for leasing new sophisticated equipment. As lessor, Juliet Company expects a 12% return on its net investment. All leases are classified as direct financing lease. At the end of the lease term, the equipment will revert to Juliet Company. On January 1, 2020, an equipment is leased to a lessee with the following information: Cost of equipment to Juliet Company Residual value – unguaranteed Annual rental payable in advance Useful life and lease term P5,250,000 P600,000 P900,000 8 years 12% Implicit lease payment First lease payment January 1, 2020 What is the unearned interest income on January 1, 2020? What is the interest income that should be recognized for 2020?
Q: TAP & Brothers Third-Quarter Budget Data July August September Credit Sales 256,167 262,962…
A: Cash Budget is an Future estimation of all expected cash receipts and cash payments to be made for…
Q: You have a business manufacturing Artfarts for Dogtown, Inc. Following is the costing data you have…
A: Activity-based costing is a costing approach in which a company's activities are identified and the…
Q: List 5 REIT Regulations by IRS
A: A real estate investment trust (REIT) is a corporation that owns, operates, or funds…
Q: DATE DETAILS UNITS COST PER UNIT 1 OPENING INVENTORY 20 R85 7 Purchases 23 R90 16 Purchases 33 R95…
A: Weighted average means that cost of inventory and cost of goods sold can be calculated by taking…
Q: Wildhorse Company’s budgeted sales and direct materials purchases are as follows. Budgeted…
A: Calculation of Total Collections in March March Cash Sales of March $ 77,130…
Q: . is planning to introduce changes in its collection procedures. The new procedures are expected to…
A: Basic concept of Accounting
Q: Sales Forecast and Budget Audio-2-Go, Inc., manufactures MP3 players. Models A-1, A-2, and A-3 are…
A: Model A-1 Number of units = 50% of last years’ units =50% of 24,000 = 12,000 units Selling price per…
Q: On August 1, Rantoul Stores Inc. is considering leasing a building and purchasing the necessary…
A: Differential analysis is a decision-making approach that analyses the net effects of two…
Q: Please prepare a bank reconciliation and journal entries for the month ended April 30th for Bannon…
A: The bank reconciliation statement is prepared to adjust the balances of cash book and pass book with…
Q: From the following facts, for the units produced depreciation, what is: Given: COST - $ 40,000…
A: Depreciation expense per year = Units production rate × Units produced
Q: Directions: Prepare a schedule of cost of goods sold for the three-month period and a statement of…
A: Data from the accounts of Ken Merchandising for the one month period ended 31st March, 2020 is given…
Q: On September 30, 20x1, the warehouse of A Company for inventory in progress and all inventories…
A: Work in process inventory means inventory which is not completed or completely manufactured yet.…
Q: The total of the partners' capital accounts was P770,000 before the recognition of partnership asset…
A: Revaluation of asset means to re-value the worth of the assets as per market price of the same.
Q: On October 31, 2021, Aaron, Nono and Enok who share earnings 5:3:2, respectively, decided to…
A: Liquidation means where the business of firm is closed down , assets are sold out and liabilities…
Q: ales Budget FlashKick Company manufactures and sells soccer balls for teams of children in…
A: The sales budget is prepared to estimate the sales revenue to be earned during the period with…
Q: Carl has a b
A: The income of the parent company does not include any income from its subsidiary company which shows…
Q: 14.24 David Jurman, Ltd., has received the following orders: Period 1 3 4 6. 10 40 30 40 8 9 Order…
A: The process of determining how much resource will be required to fulfill demand is referred to as…
Q: Requirements: 1. Prepare Journal Entries of each transaction. (With explanations) 2. Prepare…
A: Here asked for multi sub part question we will solve first three sub part question. If you need…
Q: What is the relationship between the balance sheet, income statement, statement of cash flows, and…
A: Financial statement includes various statement like statement of cash flow (CFS), Balance sheet,…
Q: The petty cash fund of ABC Corp consisted of the following: Currency and coins, P2,000 Employees…
A: Petty cash is a small amount of cash on hand that is used for paying small amounts owed, rather than…
Q: Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces wiring harness assemblies used…
A: A cash budget is the presentation of total cash available as reduced by the cash disbursements…
Q: or the past quarter follow: Dirt Mountain Racing Bikes Total Bikes Bikes Sales.. Varlable…
A: The contribution margin can be stated on a gross or per-unit basis. It shows the additional money…
Q: 3. The selling and administrative expense budget of Ruffing Corporation is based on budgeted unit…
A: Cash disbursement for selling and administrative expenses = Variable selling and administrative…
Q: 8. Cost of goods sold budget Direct materials used Part K298 Part C30 Direct labor used Overhead…
A: Budgeting is an important tool for cost managers of an entity. Budgeting means pre estimation of…
Q: Indicate whether the breakeven point will increase or decrease based on the following change (each…
A: Break even point = Fixed costs /Contribution margin per unit where, Contribution margin per unit =…
Q: Home Office put up a branch with initial investment of cash 400,000; and equipment 180,000, and…
A: Head office means from where the company mainly operate and all branches are controlled from that…
Q: On January 1, 2017, Naruto Company issued its P2,000,000, 10%, 5-year-term bonds for 1.125. Bond…
A: Carrying amount of the bond liability = Cash proceeds from bonds issue - Amortized bond premium for…
Q: On January 1, 2021, the start of the current financial year, Tubble Ltd had in issue 36 million…
A: 1. Determination of Journal entries to record issue of bonus shares Date Account title and…
Q: The partnership of Miner Company began operations on January 1, with contributions as follows:…
A: The percentage stake that a partner holds in partnership assets is referred to as partnership…
Q: M8
A: The quantity demanded of a commodity is equal to the quantity supplied is known as equilibrium…
Q: On January 1, 2019, Jerome Company signed a 12-year lease for a building. The entity has an option…
A: Carrying amount refers to the difference between book value and depreciation.
Q: . Entities may apply a simplified approach when recognizing impairment losses on trade receivables…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Observation of the four previous months has identified the folowing total cost data for production…
A: High low method formula: Variable cost per unit = (Highest activity cost - Lowest activity cost) /…
Q: n, in roper soid, and gross profit for the year ended December 31, 2020 using the data. Write your…
A: Solution: Gross profit = Net Sales - Cost of goods sold Net Sales = Gross sales - Sales returns and…
Q: NhyiraCapital Limited began research into the software it has used over a period. The software has…
A: The question is related to Accounting for Intangible Assets. As per the Standard the development of…
Q: 9. Lt. Dan Corporation invested S80,000 in a manufacturing equipment. The salvage value of the asset…
A: The rate of return on investment shows the percentage of return earned by the company on the money…
Q: Lucille Corporation has 70,000, 6% ,20 par cumulative, participating preference shares outstanding…
A: Cumulative Preference Share: Cumulative preferred stock is a form of preferred stock that has a…
Q: Make a list of the pluses and minuses of investing in either common stock or preferred stock, and…
A: investment means knowing the risk and return associated after analysing the market and individual…
Q: a. $40,000
A: Internal rate of return refers to the method of financial analysis for computing the profitability…
Q: Direct materials used in production totaled $300,000. Direct labor was $370,000and factory overhead…
A: Total manufacturing costs is the sum total of direct materials used in production, Direct Labor cost…
Q: Describe three (3) techniques of constructing accounts from incomplete records.
A: If all the records have not been made available, these are known as incomplete records.
Q: The Robot Lounge's beginning and ending inventory for 2020 are $22,000 and $15,000, respectively.…
A: Formula used: Inventory turnover = Cost of goods sold / Average inventory.
Q: Using the following information: a. The bank statement balance is $3,759. b. The cash account…
A: Bank reconciliation is the process of comparing the balance in an entity's account account to the…
Q: Question 1 Use the following information for Questions 1 a) and 1 b): a) At the beginning of the…
A: Overhead means the cost incurred indirect in factory for the production of goods. Manufacturing…
Q: Prepare a vertical analysis of the balance sheets for Year 4 and Year 3. (Percentages may not add…
A: Percent of total for assets = Asset amount/Total assets Percent of total for liabilities =…
Q: In determining changes to a partner's outside basis, which of the following statements is false?…
A: Partnership firm is established/started by two or more person agreed upon sharing profits or losses.…
Q: Operating Budget, Comprehensive Analysis Ponderosa, Inc., produces wiring harness assemblies used…
A: The sales budget is prepared to estimate the number of units to be sold and revenue to earned during…
Q: Palmgren Company produces consumer products. The sales budget for four months of the year is…
A: Note: Units produced = Total needed - Beginning inventory Total needed = Unit sales + Desired ending…
Q: True or False 1. If all individual B/C ratios of MEAs are less than 1.00, then the preferred option…
A: The benefit-cost ratio (BCR) is a ratio used in a cost benefit analysis to summarize the overall…
Q: Problem 5 Prepare a cash budget by month for the month quarter ending September 30, 2009, from the…
A: Cash Budget refers to Future Estimation of Expected cash receipts and Payments to be incurred during…
Step by step
Solved in 2 steps
- 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?Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.
- Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of 300,000, and a zero estimated residual value. 3. Sax agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. The annual payment is set by Appleton at 83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Saxs incremental borrowing rate is 10%. 6. Sax uses the straight-line method to record depreciation on similar equipment. Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax. 2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar). 3. Prepare a table summarizing the lease payments and interest expense. 4. Prepare journal entries for Sax for the years 2019 and 2020.Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
- Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
- Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line methodUse the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).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.