Question
In: Accounting
&nb
| Balance Sheet | |||
| 2019 | 2020 | 2021 | |
| Asset | |||
| Current Asset | |||
| Cash | ? | ? | ? |
| Accounts Receivable | 120000 | 100000 | 150000 |
| Prepaid Expenses | 8000 | 5000 | 2000 |
| Future Tax Asset | ? | ? | ? |
| Long-term Asset | |||
| ? | |||
| Total Assets | |||
| Liabilities | |||
| Current Liabilities | |||
| Accounts Payable | 100000 | 80000 | 90000 |
| Unearned Revenue | 10000 | 8000 | 12000 |
| Future Tax Liabilities | ? | ? | ? |
| Long-term Liabilities | |||
| ? | |||
| Total Liability | |||
| Shareholders' Equity | |||
| Retained Earnings | ? | ? | ? |
| Common Equity | 200000 | 200000 | 200000 |
| Total Shareholders' Equity | |||
| Total Liability and Equity | |||
Company A started at the beginning of 2019.
They entered into a lease with Jan 1st as both inception and
commencement date
The Lease term is as below
- 5 yr non-cancellable
- 5% interest rate
- equal payment of $22916.51 at the end of each year
- $1,000 bargaining purchase option at the end of lease term
The useful life of this asset is 6 years with 0 residual value
Tax rate 25%, 30% and 35% each of the year
Earnings before interest, amortization and taxes for each
year
2019 $123,456
2020 $234,567
2021 $345,678
Required:
a) Prepare an amortization table for the lease
b) Record all related Journal entries
c) Complete the balance sheet
d) If instead of lease, company A pays $6,000/year rental to use
the same equipment
what impact would this make?
Solutions
Expert Solution
| a) | An amortization table for the lease | |||||
| Interest Rate | 5% | |||||
| Year | Opening Balance | Interest | Installment | Principal Payment | Closing balance | |
| 2019 | 99216.50 | 4960.82 | 22916.51 | 17955.69 | 81260.81 | |
| 2020 | 81260.81 | 4063.04 | 22916.51 | 18853.47 | 62407.34 | |
| 2021 | 62407.34 | 3120.37 | 22916.51 | 19796.14 | 42611.20 | |
| 2022 | 42611.20 | 2130.56 | 22916.51 | 20785.95 | 21825.25 | |
| 2023 | 21825.25 | 1091.26 | 22916.51 | 21825.25 | 0.00 |
| b) Journal Entries in the books of Company A | |||
| Date | Particualrs | Debit | Credit |
| 31-12-2019 | Lease Assets | 99216.50 | |
| To Lease Liability | 99216.50 | ||
| 31-12-2019 | Lease Liability | 17955.69 | |
| Interest Expenses | 4960.82 | ||
| To Cash | 22916.51 | ||
| 31-12-2019 | Depreciation | 16536.08 | |
| T0 Lease Assets | 16536.08 | ||
| 31-12-2020 | Lease Liability | 18853.47 | |
| Interest Expenses | 4063.04 | ||
| To Cash | 22916.51 | ||
| 31-12-2020 | Depreciation | 16536.08 | |
| T0 Lease Assets | 16536.08 | ||
| 31-12-2021 | Lease Liability | 19796.14 | |
| Interest Expenses | 3120.37 | ||
| To Cash | 22916.51 | ||
| 31-12-2021 | Depreciation | 16536.08 | |
| T0 Lease Assets | 16536.08 |
| c) Balance Sheet | |||
| 2019 | 2020 | 2021 | |
| Asset | |||
| Current Asset | |||
| Cash | -22916.51 | -22916.51 | -22916.51 |
| Accounts Receivable | 120000 | 100000 | 150000 |
| Prepaid Expenses | 8000 | 5000 | 2000 |
| Future Tax Asset | 0 | 0 | 0 |
| Long-term Asset | 82680.41 | 66144.33 | 49608.25 |
| Total Assets | |||
| Liabilities | |||
| Current Liabilities | |||
| Accounts Payable | 100000 | 80000 | 90000 |
| Unearned Revenue | 10000 | 8000 | 12000 |
| Future Tax Liabilities | 25,489.8 | 64,190.36 | 1,14,107.54 |
| Long-term Liabilities | 81,260.8 | 62407.34 | 42611.20 |
| Total Liability | |||
| Shareholders' Equity | |||
| Retained Earnings | 76,469.32 | 2,26,246.83 | 4,38,160.84 |
| Common Equity | 200000 | 200000 | 200000 |
| Total Shareholders' Equity | 2,76,469.32 | 4,26,246.83 | 6,38,160.84 |
| Total Liability and Equity |
| d) |
If instead of lease, company A
pays $6,000/year rental to use the same equipment then impact would be this |
| It will not creat any assets and also tax benefit onn interest paid not allowed |
Working
| Note 1 | ||||||
| Yaer | Payment | Discount factor | Present Value | |||
| 2019 | 22916.51 | 0.95238 | 21825.25 | |||
| 2020 | 22916.51 | 0.90703 | 20785.95 | |||
| 2021 | 22916.51 | 0.86384 | 19796.14 | |||
| 2022 | 22916.51 | 0.82270 | 18853.47 | |||
| 2023 | 22916.51 | 0.78353 | 17955.69 | |||
| 114582.55 | 99216.50 | |||||
| Note 2 | ||||||
| This is Finance Lease | ||||||
| There is a bargain purchase option – an option given to the lessee to purchase the asset at a price lower than its fair value at a future date (typically the end of the lease term). This option is usually determined at the beginning of the lease. | ||||||
| Its given that $1,000 bargaining purchase option at the end of lease term so its Finance lease | ||||||
| Note 3 | ||||||
| Depreciation | ||||||
| Value | 99216.50 | |||||
| Years | 6 | |||||
| 16536.08 | ||||||
| Note 4 | ||||||
| Net Profit | ||||||
| Year | Earnings before interest, amortization and taxes | Interest Expenses | amortization |
Ear
 ekkarill92 answered 2 years agoRelated Solutions&nb
$
Sales 10,000,000
Cost of
sales
(6,000,000)
Gross profit 4,000,000
Expenses
(3,000,000)
Net profit 1,000,000
It had been budgeted to produce 200,000 units and these should
have taken 10 hours each. In fact,
120,000 units were produced in 580,000 hours.
The capital employed by the division is $4,000,000 and the
interest rate is 7%.
Calculate:
(a) Efficiency, capacity utilisation and production volume
ratios or percentages
(b) ROCE (Return on Capital Employed)
(c) RI (Residual Income)
&nb
Assembly
Customizing
Total machine
hours
19,000
15,000
Direct labor
hours
4,000
6,000
Fixed manufacturing
overhead
$100,700
$63,000
Variable manufacturing overhead per machine
hour
$2.00
-
Variable manufacturing overhead per labor
hour
-
$3.90
Overhead rate based
on:
Machine
hour
Labor hour
18. What is the predetermined overhead rate for the Assembly
department?
19. What is the predetermined overhead rate for the Customizing
department?
&nb
The marketing manager of a national brand of flavored milk is
considering her micro and macro environment in order to complete
the situation analysis for this years marketing plan.
She notes some key points. Small traders are not consistently
affording appropriate fridge space to flavored milks. Energy drinks
are continuing to hold favour in the teen market. Young adults aged
18-25 are more conservative than their slightly older cohort 25-35.
UHT or long life milk has processed to the...
&nb
Units
Cost per unit Total
Beginning inventory 60
$10
Puirchase 3/31 40
$11
Purchase 4/30 40
$12
Purchase 5/31 60
$13
Total
200
There are a total of 200 units. 80 units were left in
ending inventory. Calculate the following under the periodic method
for costing inventory:
Compute ending inventory using FIFO.
Compute cost of merchandise sold using
FIFO.
Compute ending inventory using LIFO.
Compute cost of merchandise sold using
FIFO.
Compute ending inventory using weighted average
cost.
Compute...
&nb
1st
Quarter 2nd
Quarter 3rd
Quarter 4th
Quarter
Total Cash
Receipts $150,000 175,000 100,000 450,000
Total Cash
Disbursements $170,000 250,000 100,000 320,000
The company’s beginning cash balance for the upcoming fiscal
year will be $40,000. The company requires a minimum cash balance
of $15,000 and may borrow any amount needed from a local bank at a
quarterly interest rate of 3%. The company may borrow any amount at
the beginning of any quarter and may repay its loans, or any part
of its loans, at the end of any quarter. Interest...
&nb
Question Two
Faulu College has a total of 52
students undertaking three courses namely; Business Mathematics,
Economics and Law. During recently conducted examinations, 13
students excelled in Business Mathematics and Law, 16 students
excelled in Business Mathematics and Economics and 12 students
excelled in Law and Economics. The number of students that excelled
in Economics was 24 while 2 students excelled in none of the three
courses. The number of students who excelled in Business
Mathematics only was...
&nb
To build the chairs and tables, a machine was purchased and workers
were hired. Part of the manufacturing process for both products is
automated, and part of the manufacturing process for both products
is done by
hand.
The number of each product to be produced is as
follows:
Yearly Number Of Chairs To Be
Produced
104,000
Yearly Number Of Tables To Be
Produced
80,000
It is determined that to produce...
&nb
Continuous Probability Distributions
You must draw diagram for each question and show all
workings. Answers without clearly labelled diagrams and workings
will not score full marks.
Before we can use the Z tables, we have to
standardise the normal variable (X) first, i.e. converting X into Z
score. THA 4 will assess you on your ability of applying the
standardisation formula and using the Z and inverse Z
tables.
Question 1 Stock Returns Stock returns are often assumed to...
&nb
(4 points) Production Possibility Frontiers: apples and
wheat
Table 1. Production of apples and wheat
Apples
Wheat
0
500
1
499
2
495
3
489
4
476
5
453
6
415
7
358
8
275
9
160
10
5
(1 point) Draw a production possibilities curve for your
two-acre farm between growing apples and wheat. Is there a tradeoff
between these two? How is a tradeoff shown in...
&nb
PROBLEM 1
Required:
Part 1: Complete a Balance Sheet and analyze using vertical and
horizontal analysis. Then
answer a few questions regarding the absolute (dollar)
changes.
Part 2: Complete a Summary Operating Statement (Income
Statement) and analyze using
vertical and horizontal analysis.
Part 3: Complete a Statement of Cash Flows.
Part 1:
Below are the balance sheet accounts and balances for The Cougar
Hotel for the years 20X7
and 20X8, please complete the following:
1. Organize the information into...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
ADVERTISEMENT
|