On January 2, 2021, Carla Vista, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $370000 starting at the beginning of the first year, with title passing to Carla Vista at the expiration of the lease. Carla Vista treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Carla Vista uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $2179016, based on implicit interest of 11%. In its 2021 income statement, what amount of amortization expense should Carla Vista report from this lease transaction? O $182268 O $217902 O $370000 O $145268
Q: Gray Company is a consulting firm. The firm expects to have $64,000 in indirect costs during the…
A: Introduction:- The following formula used to calculate predetermined overhead rate as follows…
Q: Production Department Factory Overhead Kate Method Handy Leather, Inc., produces three sizes of…
A: The overhead is applied to the production on the basis of a pre-determined overhead rate. The…
Q: Windhoek Manufacturers produces two products, Amber and Black. The following cost estimates have…
A: Throughput accounting gives managers information which helps them in making the decisions that will…
Q: E3.6 (LO 2, 3, 4) Mendoza Company accumulates the following adjustment data at December 31. 1.…
A: Answer:- Account adjustment meaning:- An accounting adjustment is a commercial transaction that as…
Q: X Corp has budgeted sales (in units) for the upcoming quarter as follows: Jan is 15,000; Feb is…
A: Finished Goods Produced :— It is the number of completed units that is manufactured for the desired…
Q: . If NPV is negative, company usually rejects the project. While, if ARR is greater than cost of…
A: Capital budgeting comes under the domain of corporate finance. The accounting and finance principal…
Q: Suppose a company has had the historic sales figures shown below. What would be the forecast for…
A: Based on the given data, Average of sales = Sum of sales for all time periods/No. of time periods =…
Q: If the company wants to achieve a residual income of P 40,000 using an imputed interest charge of…
A: Residual income is the leftover income for company or business after payment of all its expenses and…
Q: The credit card with the transactions described on the right uses the average daily balance method…
A: Introduction An accounting method known as the average daily balance bases interest calculations on…
Q: se the information provided below to calculate the ratios for 2021 (expressed to two decimal places)…
A: Account Payable days = (365 x Account Payable) / Cost of sales Debt to total Assets = Non Current…
Q: Star Corporation of Britain is 100% owned subsidiary of Planet Corporation, a U.S. firm. Star’s…
A: The exchange rate refers to the price of the country in terms of the price of another country. The…
Q: Q3: The following table gives the operation cost, maintenance cost and salvage value at the end of…
A: Present Value - Amounts of money that we will receive in the future are defined as having a present…
Q: A fixed capital investment of P12M is required for a production plant and an estimated working…
A: RATE OF RETURN ON INVESTMENT Rate of Return on Total Investment is one of Important Financial ratio…
Q: P486,000
A: P486,000 The taxpayer's taxable net income would be P486,000. This is calculated by taking the gross…
Q: Sweeten Company had no jobs in progress at the beginning of the year and no beginning inventories.…
A: Calculation of plantwide predetermined overhead rate are as follows
Q: Which of the following motives for M&A transactions (from the perspective of the shareholders of the…
A: Mergers and Acquisitions are strategic arrangements entered between the shareholders of two or more…
Q: Qualified opinion indicates that the statements are not presented fairly or are materially…
A: The auditor issues an audit report providing their opinions on the company's financial statements at…
Q: M, Inc. experienced an unusual decline in its income after a competitor copied its patented…
A: Gross Income is simply an income which increase the net worth of individual. It is taxable income as…
Q: Isabel is buying a house for $170,000. She plans to make a 10% down payment. Closing costs include…
A: Closing cost is the entire costs the buyer incur on purchasing a property. It can be one time…
Q: Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item…
A: FIFO Method :— It is one of the method of inventory valuation in which it is assumed that first…
Q: Arensky Company uses normal costing to account for overhead in its job costing system. There are 2…
A: As per the honor code, we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit…
Q: Food $175 Entertainment $100 Bills $91 Charitable donations $100 d. To the nearest degree,…
A: In order to manage the expense it is important to have sufficient income which is inflow. The…
Q: Margaret Rosenthal, accountant for Russell Manufacturing Company, prepared the following income…
A: The question is based on the concept of cost accounting.
Q: An investment in an associate is normally accounted for using the equity accounting method. This…
A: Whenever investor invests in shares and stock of other company, then ownership rights can be 20%,…
Q: Do you have the work sheet and financial statement for the attached homework. Critical thinking…
A: Worksheet is 10 column sheet which is being prepared in accounting to show unadjusted ledger…
Q: Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products…
A: >Under CVP analysis, the costs are classified into:--Variable cost, and--Fixed Cost.…
Q: Alfred owned a term life insurance policy at the time he was diagnosed with a terminal illness.…
A: Answer:- Gross income meaning:- The sum of an individual's earnings before taxes or any other kind…
Q: Thomas Fortuna (married; 4 federal withholding allowances) earned weekly gross pay of $745. For each…
A:
Q: Jones Corporation switched from the LIFO method of costing inventories to the FIFO method at the…
A: Retained earnings is the amount retained by an entity from its profits. It is the amount which is…
Q: blem 3 East Company submits the following data for May, 2022 Direct labor cost Cost of goods sold…
A: Cost of goods sold means actual cost of goods that are being sold to the customers. It includes…
Q: Which of the following statements are true? (i) If an investor has more than 50% ownership, it…
A: Answer: option c
Q: he budget director of Birding Homes & Feeders Inc., with the assistance of the controller,…
A: As per the guidelines we can able to solve only three part of any question ( first three), so answer…
Q: Piper Corp. had a taxable net income of P5,500,000 and total assets of P100 million. It had the…
A: We are taking itemized deductions instead of optional deduction of 40% of Net income. For interest…
Q: 29 The Home Depot is the largest home improvement retailer in the United States. Home Depot…
A: Ratio Analysis - The ratio is the technique used by the prospective investor or an individual or…
Q: REQUIRED Study the information given below and answer the following questions independently. As…
A: Hi student Since there are multiple questions, we will answer only first question. If you want…
Q: Find the value of 1,000 bonds with annual interest rate of 5% making semiannual interest payment for…
A: BOND Bond Is a Security which is Issued by the Company and Government for Funding their Business and…
Q: Q2: The designer of the penstock for a small hydroelectric cogeneration station has the option of…
A: Present Value Given a certain rate of return, present value (PV) is the current value of a future…
Q: Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing…
A: When a contribution margin income statement is prepared, the total variable costs are deducted…
Q: Which of the following is true about this statement: "In a sole proprietorship, the owner's personal…
A: The question is based on the concept of Financial Accounting. Sole proprietorship is a type of…
Q: X Corp paid dividends to OS last year by 2.20 per share. The current market price of Ordinary Shares…
A: Cost of equity (Ke) :— It is rate of return expects by common equity shareholders on their…
Q: A used car was purchased for $20,000 and sold 9 years later for $2,500. Its annual maintenance is…
A: The question is based on the concept Annuity in Financial Management. Annuity refers to the series…
Q: Monica's Cleaning Service completed the following transactions during December 2022: Dec. Monica's…
A: Golden Rules of Accounting : Account Debit Credit Personal Accounts The Receiver The…
Q: P3.1 (LO 1, 2, 3) (Multiple-Step Statement, Retained Earnings Statement) The following infor- mation…
A: Multi Step income statement is one of the financial statement which shows all incomes and all…
Q: X Corp. has three business segments with the following financial status: Store 1 Store 2 Revenue…
A: While doing the store closure analysis, we need to assess the relevant costing and should assess the…
Q: Restoring balance to the nitrogen cycle is one of the challenges facing engineers. Improving the…
A: Concept of Discounted Cash flow:- This is the concept related to discounted cash flow. The…
Q: What are the entries to? Journalize and Post the Closing Entries Prepare the Post Closing Trial…
A: Closing entries are the journal entries which are made at the end to close the temporary accounts…
Q: Skip to question [The following information applies to the questions displayed below.]…
A: The plantwide overhead rate is a single overhead rate that a company uses to allocate all of its…
Q: bills with 91 days period can be purchased at 995. What is the annualized discount rate? A• 5% B•…
A: Treasury bills is a government security which is issued for a short term. The instrument maturity is…
Q: August 2022 data Work-in-process inventory, August 1, 2022 Direct materials inventory, August 1,…
A: The total manufacturing costs are calculated as sum of direct materials, direct labor and…
Q: Discussion Topic: What is Fraud? Forensic accountants and fraud examiners provide support for…
A: Fraud is a big problem in accounting and many companies in past have gone down because they indulged…
Step by step
Solved in 3 steps
- 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?On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910Determining 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.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.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?
- Use 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).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 methodLessee 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.
- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.On January 2, 2021, Sandhill, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $260000 starting at the beginning of the first year, with title passing to Sandhill at the expiration of the lease. Sandhill treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Sandhill uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1668591, based on implicit interest of 9%.In its 2021 income statement, what amount of amortization expense should Sandhill report from this lease transaction? ANSWER CHOICES: $166859 $111239 $137239 $260000On January 2, 2021, Ivanhoe, Inc. signed a 10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $200000 starting at the beginning of the first year, with title passing to Ivanhoe at the expiration of the lease. Ivanhoe treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Ivanhoe uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1283532, based on implicit interest of 9%.In its 2021 income statement, what amount of amortization expense should Ivanhoe report from this lease transaction? $85569 $105569 $128353 $200000