Question

In: Accounting

Problem 21-3 Monty Industries and Flounder Inc. enter into an agreement that requires Flounder Inc. to...

Problem 21-3 Monty Industries and Flounder Inc. enter into an agreement that requires Flounder Inc. to build three diesel-electric engines to Monty’s specifications. Upon completion of the engines, Monty has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $403,131 each January 1, starting January 1, 2017. Monty’s incremental borrowing rate is 11%. The implicit interest rate used by Flounder Inc. and known to Monty is 9%. The total cost of building the three engines is $2,406,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Monty depreciates similar equipment on a straight-line basis. At the end of the lease, Monty assumes title to the engines. Collectibility of the lease payments is reasonably certain; no uncertainties exist relative to unreimbursable lessor costs. Click here to view factor tables (b) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Monty Industries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (c) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Flounder Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Lessee (January 1, 2017) Lessor (January 1, 2017) Debit Credit Show List of Accounts Link to Text Link to Text

Solutions

Expert Solution


Related Solutions

Pharoah Industries and Novak Inc. enter into an agreement that requires Novak Inc. to build three...
Pharoah Industries and Novak Inc. enter into an agreement that requires Novak Inc. to build three diesel-electric engines to Pharoah’s specifications. Upon completion of the engines, Pharoah has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $431,633 each January 1, starting January 1, 2017. Pharoah’s incremental borrowing rate is 10%. The implicit interest...
Kelvin Industries and Elysia Inc. enter into an agreement that requires Elysia Inc. to build three...
Kelvin Industries and Elysia Inc. enter into an agreement that requires Elysia Inc. to build three impulse drive engines to Kelvins' specifications. Upon completion of the engines, Kelvin has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2014, and requires annual rental payments of $384,532 each January 1st, starting January 1, 2014. Kelvins’ incremental borrowing rate is 8%. The implicit...
Cullumber Industries and Riverbed Inc. enter into an agreement that requires Riverbed Inc. to build three...
Cullumber Industries and Riverbed Inc. enter into an agreement that requires Riverbed Inc. to build three diesel-electric engines to Cullumber’s specifications. Upon completion of the engines, Cullumber has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $395,894 each January 1, starting January 1, 2017. Cullumber’s incremental borrowing rate is 9%. The implicit interest...
Question: Winston Industries and Ewing SA enter into an agreement that requires Ewing to build three...
Question: Winston Industries and Ewing SA enter into an agreement that requires Ewing to build three diesel-electric engines to Winston's specifications. Upon completion of the engines, Winston has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2019, and requires annual rental payments of €384,532 each January 1, starting January 1, 2019. The implicit interest rate used by Ewing is 6%...
Problem 24-2 Flounder Corporation is a diversified company that operates in five different industries: A, B,...
Problem 24-2 Flounder Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2018. A B C D E Sales revenue $40,100 $74,500 $575,600 $34,900 $55,000 Cost of goods sold 19,400 49,200 270,300 19,100 29,900 Operating expenses 10,100 39,700 235,900 12,000 18,300     Total expenses 29,500 88,900 506,200 31,100 48,200 Operating profit (loss) $10,600 $(14,400) $69,400 $3,800 $6,800 Identifiable assets $35,600 $79,000 $490,300 $65,700...
Problem 24-2 Flounder Corporation is a diversified company that operates in five different industries: A, B,...
Problem 24-2 Flounder Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2018. A B C D E Sales revenue $40,100 $74,500 $575,600 $34,900 $55,000 Cost of goods sold 19,400 49,200 270,300 19,100 29,900 Operating expenses 10,100 39,700 235,900 12,000 18,300 Total expenses 29,500 88,900 506,200 31,100 48,200 Operating profit (loss) $10,600 $(14,400) $69,400 $3,800 $6,800 Identifiable assets $35,600 $79,000 $490,300 $65,700...
Problem 21-3A Thakin Industries Inc. manufactures dorm furniture in separate processes. In each process, materials are...
Problem 21-3A Thakin Industries Inc. manufactures dorm furniture in separate processes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows. Cutting Department Production Data—July Plant 1 T12-Tables Plant 2 C10-Chairs Work in process units, July 1 0 0 Units started into production 21,800 17,440 Work in process units, July 31 3,270 545 Work in...
Problem 21-6 Receivables Investment Snider Industries sells on terms of 3/10, net 25. Total sales for...
Problem 21-6 Receivables Investment Snider Industries sells on terms of 3/10, net 25. Total sales for the year are $980,000. Thirty percent of the customers pay on the 10th day and take discounts; the other 70% pay, on average, 90 days after their purchases. Assume 365 days in year for your calculations. What is the days sales outstanding? Round your answer to one decimal place. days What is the average amount of receivables? Round your answer to the nearest dollar....
Problem 21-6 The following facts pertain to a noncancelable lease agreement between Faldo Leasing Company and...
Problem 21-6 The following facts pertain to a noncancelable lease agreement between Faldo Leasing Company and Bridgeport Company, a lessee. Inception date January 1, 2017 Annual lease payment due at the beginning of    each year, beginning with January 1, 2017 $117,768 Residual value of equipment at end of lease term,    guaranteed by the lessee $50,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2017 $556,000 Lessor’s implicit rate 13 %...
Problem 21-03 Coronado Steel Company, as lessee, signed a lease agreement for equipment for 5 years,...
Problem 21-03 Coronado Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $57,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Coronado’s incremental borrowing rate is 9%. Coronado is unaware of the rate being used by the lessor. At the end of the lease, Coronado has the option to...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT