Journal Entries for a Capital Lease-Lessee

On January 1, the lessee company signed an operating lease contract. The lease contract calls for $3,000 payments at the end of each year for 10 years. The rate implicit in the lease is 10%.

Assume that the lease is to be accounted for as a capital lease. Also assume that the leased asset is to be amortized over the 12-year asset life rather than the 10-year lease term.

1. Make the journal entries necessary on the books of the lessee company at the end of the first year, including the recording of the first lease payment. Round your answers to the nearest whole dollar. For compound transactions, if an amount box does not require an entry, leave it blank.

* Note: I got 1286 and it was wrong.

Assume that the FASB is considering revising an important accounting standard.

Required:

1. what constraint applies to the FASB's consideration of whether to require companies to provide new imformation?

2. In what concepts statement is that constraint discussed?

3. What are some of the possible costs that could result from a revision of an accounting standard?

what does the FASB do in order to assess possible benefits and costs of a proposed revision of an accounting standard?

1. Identify for each of the three major methods of calculating depreciation (Straight-Line, Double Declining Balance, Units of Production), a company that would likely use that method. Why would that company choose that specific method?

2. Pick two companies within the same industry. One example would be Apple and Samsung. Find the financial statements for those companies and calculate their return on assets. Which company is performing better? What do you think is causing them to perform better?

Perdue Company purchased equipment on April 1 for $270,000. The equipment was expected to have a useful life of three years or 18,000 operating hours, and a residual value of $9,000. The equipment was used for 7,500 hours during Year 1, 5,500 hours in Year 2, 4,000 hours in Year 3, and 1,000 hours in Year 4. Required: Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) units-of-activity method, and (c) the double-declining-balance method. Note: FOR DECLINING BALANCE ONLY, round the answer for each year to the nearest whole dollar.

a. Straight-line method Year Amount

Year 1 $

Year 2 $

Year 3 $

Year 4 $

b. Units-of-activity method Year Amount

Year 1 $

Year 2 $

Year 3 $

Year 4 $

c. Double-declining-balance Method Year Amount

Year 1 $

Year 2 $

Year 3 $

Year 4 $

Jesse’s former residence was rented almost immediately with occupancy commencing April 1, 2018, under the following terms: one-year lease, $2,400 per month due the first day of the month, first and last months’ rent in advance, $2,000 damage deposit, lawn care included but not utilities. The tenant complied with all terms except that the December rent payment was not made until January 1, 2019, because the tenant took an extended holiday trip that started on Thanksgiving Day (November 22) through Christmas Day (December 25). Expenses in connection with the property were as follows: property taxes, $2,600; repairs, $320; lawn maintenance, $540; insurance, $1,800; and street paving assessment, $2,100. The property is located at 12120 Lake Road, Harvey, MI 49855.

How would this be presented on a tax return? What expenses would be included/excluded and what income would be recognized? United States Tax Laws

list 3 possible ways that auditor independence could be further enhanced and improved beyond what is currently in place in practice or through auditing standards.

i)Able to explain in detail and clearly the companies’ dividend payout trend based on the ratios computed above, Clear and detailed explanation on the factors that influence the companies’ dividend policy decision during the five-year period,Able to relate the explanation with relevant dividend theories and concepts.

(300 word only)

Lahser Corp. produces component parts for durable medical equipment manufacturers. The controller is building a master budget for the first quarter of the upcoming calendar year. Selected information from the accounting records is presented next:

a. Accounts Receivable as of January 1 are $56,800. Selling price per unit is projected to remain stable at $13 per unit throughout the budget period. Sales for the first six months of the upcoming year are budgeted to be as follows: January $99,100 February $118,100 March $114,700 April $108,400 May $103,300 June $121,200

b. Sales are 20% cash and 80% credit. All credit sales are collected in the month following the sale.

c. Lahser Corp. has a policy that states that each month’s ending inventory of finished goods should be 10% of the following month’s sales (in units).

d. Three pounds of direct material is needed per unit at $2.20 per pound. Ending inventory of direct materials should be 20% of next month’s production needs.

e. Monthly manufacturing overhead costs are $5,530 for factory rent, $2,900 for other fixed manufacturing costs, and $1.10 per unit produced for variable manufacturing overhead. All costs are paid in the month in which they are incurred.

Questions:

1. What are the budgeted total cash collections for the 1st quarter? (1 point)

2. What are the budgeted total cash collections for the 2nd quarter? (1 point)

3. What is the budgeted production for the first quarter in terms of number of units? (HINT: Convert total sales to unit sales for each month) (1 point)

4. What is the budgeted direct materials cost for the first quarter? (1 point)

5. What is the budgeted manufacturing overhead for the first quarter? (1 point)

The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized.

Other information from the company’s records includes the following:

• Bought equipment for cash, $107,000.
• Paid $19,500 on long-term note payable.
• Issued new shares of common stock for $20,000 cash.
• Cash dividends of $33,600 were declared and paid to stockholders.
• Accounts Payable arose from inventory purchases on credit.
• Income tax expense ($25,910) and interest expense ($5,850) were paid in full at the end of both years and are included in Other Expenses.

Advanced Enterprises reports yearminusend information from 2018 as follows: Sales (160,250 units) $968,000 Cost of goods sold 641,000 Gross margin 327,000 Operating expenses 263,000 Operating income $64,000 Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by 14.5%, and as a result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. Should Advanced increase the selling price in 2019? A. Yes, because operating income increases for 2019. B. Yes, because sales revenue increases for 2019. C. No, because gross margin decreases for 2019. D. No, because sales volume decreases for 2019.

During the summer between his junior and senior years, James Cook needed to earn sufficient money for the coming academic year. Unable to obtain a job with a reasonable salary, he decided to try the lawn care business for three months. After a survey of the market potential, James bought a used pickup truck on June 1 for $1,340. On each door he painted "James Cook Lawn Service, Phone 471-4487." He also spent $740 for mowers, trimmers, and tools. To acquire these items, he borrowed $2,510 cash by signing a note payable promising to pay the $2,510 plus interest of $70 at the end of the three months (ending August 31). By the end of the summer, James had done a lot of work and his bank account looked good. This prompted him to wonder how much profit the business had earned. A review of the check stubs showed the following: Bank deposits of collections from customers totaled $12,500. The following checks had been written: gas, oil, and lubrication, $1,110; pickup repairs, $340; mower repair, $110; miscellaneous supplies used, $100; helpers, $5,500; payroll taxes, $360; payment for assistance in preparing payroll tax forms, $40; insurance, $125; telephone, $200; and $2,580 to pay off the note including interest (on August 31). A notebook kept in the pickup, plus some unpaid bills, reflected that customers still owed him $730 for lawn services rendered and that he owed $190 for gas and oil (credit card charges). He estimated that the cost for use of the truck and the other equipment (called depreciation ) for three months amounted to $670. Required: 1. Prepare a quarterly income statement for James Cook Lawn Service for the months June, July, and August. Assume that the company will not be subject to income tax.

A partially completed balance sheet for Blue Co., Inc., as of October 31, 2013, follows. Where amounts are shown for various items, the amounts are correct. Required: Using the following data, complete the balance sheet. a. Blue Co.'s records show that current and former customers owe the firm a total of $4,400; $650 of this amount has been due for more than a year from two customers who are now bankrupt. b. The automobile, which is still being used in the business, cost $17,400 new; a used car dealer's Blue Book shows that it is now worth $10,000. Management estimates that the car has been used for one-third of its total potential use. c. The land cost Blue Co. $11,000; it was recently assessed for real estate tax purposes at a value of $15,000. d. Blue Co.'s president isn't sure of the amount of the note payable, but he does know that he signed a note. e. Since Blue Co. was formed, net income has totaled $33,000, and dividends to stockholders have totaled $21,250. Loading...

Preparing an Income Statement and a Statement of Comprehensive Income

The following pretax amounts are taken from the adjusted trial balance of Avoca Auto Corp. at December 31, 2020, its annual year-end.

Sales Revenue $416,000

Cost of good sold 176,000

operating expenses 128,000

gain on debt retirement 32,000

interest expense 12,800

loss from discontinued operations. 80,000

retained earnings balance, December 31, 2019 48,000

dividends declared and paid 40,000

unrealized holding gain on debt investment securities, net of tax 6,400

Common stock, weighted average shares outstanding 16,000 Shares

Required

a. Prepare a single-step income statement. Assume an average 25% tax rate on all items. Include earnings per share disclosures.
b. Prepare a comprehensive income statement by showing a separate but consecutive statement of comprehensive income. Ignore earnings per share disclosures.
c. Compute the ending retained earnings balance at December 31, 2020.

• Enter revenues and gains and expenses and losses in the order of the largest dollar amount to the smallest dollar amount.
• Do not use negative signs with any of your answers.
• Round the per share amounts to two decimal places.

Explain one audit technique you would use to determine the existence of a material error on inventory account?

Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions:

*Before any purchase discount.

Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated. Required:

1. Refer to case 1 shown above. Alpha Division can avoid $4 per unit in commissions on any sales to Beta Division.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?

2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $5 per unit in shipping costs on any sales to Beta Division.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be? d. Assume Alpha Division offers to sell 72,000 units to Beta Division for $34 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?

3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 4% price discount from the outside supplier.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?

b. What is the highest acceptable transfer price from the perspective of the Beta Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?

d. Assume Beta Division offers to purchase 20,000 units from Alpha Division at $53.56 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?

4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 64,000 units of a different product from the one Alpha Division is producing now. The new product would require $26 per unit in variable costs and would require that Alpha Division cut back production of its present product by 32,000 units annually. What is the lowest acceptable transfer price from Alpha Division’s perspective?