Question 2 Topic: Leases (for lessees) Answer both parts independently of each other.
Part A Supply Ltd entered into a non-cancellable five-year lease arrangement with Customer Ltd on 1 July 2019. The lease is for an item of machinery. There are to be five annual payments of $315 000, the first being made on 30 June 2020. The implicit interest rate is 12%. The Machinery is expected to have an economic life of six years, after which time it will have an expected residual value of $210 000. There is a bargain purchase option that Customer Ltd will be able to exercise at the end of the fifth year for $280 000. Customer Ltd determined that this contract contains a lease.
REQUIRED: Prepare the journal entries in the books of the lessee (Customer Ltd) from 1 July 2019 to 30 June 2020 (the end of the reporting period). Show all working.
Part B Customer Ltd enters into a 10-year contract with Supplier Ltd for the right to use two specified physically distinct dark fibres within a larger cable connecting Hong Kong to Tokyo. Customer Ltd makes the decisions about the use of the fibres by connecting each end of the fibres to its electronic equipment (i.e., Customer ‘light’ the fibres and decides what data and how much data to transfer). If the fibres are damaged, Supplier Ltd is responsible for the repairs and maintenance. Supplier Ltd owns extra fibres but can substitute those for Customer Ltd’s fibres only for reasons of repairs, maintenance or malfunction.
REQUIRED: Determine whether the contract contains a lease. Please explain and justify your conclusion according to AASB 16.
In: Accounting
Deductible expenses for a service member’s moving do not include:
a. the cost of transporting household goods
b. Hotel Cost while moving to the new locations
c. Meals Incurred during the move
d. storage of household goods for a limited time upon arrival at the new location
In: Accounting
In: Accounting
Identifying Operating and Nonrecurring Income Components
Following is the The Dow Chemical Company income statement.
| Net sales | $58,167 | $57,080 |
| Cost of sales | 47,464 | 47,594 |
| Research and development expenses | 1,647 | 1,747 |
| Selling, general, and administrative expenses | 3,106 | 3,024 |
| Amortization of intangibles | 436 | 461 |
| Goodwill and other intangible asset impairment losses | 50 | - |
| Restructuring charges (credits) | (3) | (22) |
| Asbestos-related charge | 78 | - |
| Equity in earnings of nonconsolidated affiliates | 835 | 1,034 |
| Sundry income (expense)—net | (27) | 2,554 |
| Interest income | 51 | 41 |
| Interest expense and amortization of debt discount | 983 | 1,101 |
| Income before income taxes | 5,265 | 6,804 |
| Provision for income taxes | 1,426 | 1,988 |
| Net income | $3,839 | $4,816 |
equired
a. Identify the components in its statement that you would
consider operating.
b. Identify those components that you would consider
nonrecurring.
| ($ millions) For Year Ended | December 31 | a. | b. | |
|---|---|---|---|---|
| 2014 | 2013 | Operating? | Nonrecurring? | |
| Net sales | $58,167 | $57,080 | YesNo | YesNo |
| Cost of sales | 47,464 | 47,594 | YesNo | YesNo |
| Research and development expenses | 1,647 | 1,747 | YesNo | YesNo |
| Selling, general, and administrative expenses | 3,106 | 3,024 | YesNo | YesNo |
| Amortization of intangibles | 436 | 461 | YesNo | YesNo |
| Goodwill and other intangible asset impairment losses | 50 | - | YesNo | YesNo |
| Restructuring charges (credits) | (3) | (22) | YesNo | YesNo |
| Asbestos-related charge | 78 | - | YesNo | YesNo |
| Equity in earnings of nonconsolidated affiliates | 835 | 1,034 | YesNo | YesNo |
| Sundry income (expense)—net | (27) | 2,554 | YesNo | YesNo |
| Interest income | 51 | 41 | YesNo | YesNo |
| Interest expense and amortization of debt discount | 983 | 1,101 | YesNo | YesNo |
| Income before income taxes | 5,265 | 6,804 | ||
| Provision for income taxes | 1,426 | 1,988 | YesNo | YesNo |
| Net income | $3,839 | $4,816 | ||
c. Compute net operating profit after taxes (NOPAT) and net
operating profit margin (NOPM) for each year.
Assume a statutory tax rate of 35%.
| 2014 | 2013 | |
|---|---|---|
| NOPAT (Round your answer to the nearest million dollar.) | $ million | $ million |
| NOPM (Round your answer to one decimal place.) | % | % |
I can't get NoPat right...someone already answered this question on chegg but the answer for Nopat is wrong. please help.
In: Accounting
Prepare journal entries for a local government to record the following transactions, first for fund financial statements and then for government-wide financial statements.
A.The government sells $900,000 in bonds at face value to finance construction of a warehouse.
B. A $1.1 million contract is signed for construction of the warehouse. The commitment is required, if allowed.
C. A $130,000 transfer of unrestricted funds was made for the eventual payment of the debt in (a).
D. Equipment for the fire department is received with a cost of $12,000. When it was ordered, an anticipated cost of $11,800 had been recorded.
E. Supplies to be used in the schools are bought for $2,000 cash. The consumption method is used.
F. A state grant of $90,000 is awarded to supplement police salaries. The money will be paid to reimburse the government after the supplement payments have been made to the police officers.
G.Property tax assessments are mailed to citizens of the government. The total assessment is $600,000, although officials anticipate that 4 percent will never be collected. There is an enforceable legal claim for this money and the government can use it immediately.
In: Accounting
In: Accounting
On 1/1/2001, ABC Co. issued $1,000,000 5-year bonds with a market rate of 8%. Interests are paid annually on 12/31. The coupon rate is 6%. Answer the following questions assuming that the company uses the effective interest method of amortization. Show your calculations. 1. Determine the selling price of the bond on the issue date. Is it issued at a premium or discount? 2. Give the journal entry to record the bond issuance above. 3. How much is the interest expense for ABC Co. for the fiscal year that ended 12/31/2001? Give the journal entry to record the interest expense. 4 . On 1/1/2003, ABC Co. found itself with a lot of excess cash and it will be best for them to buy back their bonds from the open market and retire them so as to avoid future interest payments. The market interest rate on 1/1/2003 is 9%. Calculate: (i) the cash amount that ABC has to pay to retire the bond (ii) the book value (i.e., net borrowing) of the bonds on 1/1/2003 (iii) gain/loss from the retirement (iv) provide the journal entry for the early retirement of bonds.
In: Accounting
Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others. (Hint: One way to find the missing amounts would be to prepare a contribution format income statement for each case, enter the known data, and then compute the missing items.)
Required:
a. Assume that only one product is being sold in each of the four following case situations:
b. Assume that more than one product is being sold in each of the four following case situations:
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In: Accounting
Montoure Company uses a perpetual inventory system. It entered
into the following calendar-year purchases and sales
transactions
| Date | Activities | Units Acquired at Cost | Units Sold at Retail | |||||||||
| Jan. | 1 | Beginning inventory | 600 | units | @ $60 per unit | |||||||
| Feb. | 10 | Purchase | 480 | units | @ $57 per unit | |||||||
| Mar. | 13 | Purchase | 120 | units | @ $42 per unit | |||||||
| Mar. | 15 | Sales | 785 | units | @ $80 per unit | |||||||
| Aug. | 21 | Purchase | 180 | units | @ $65 per unit | |||||||
| Sept. | 5 | Purchase | 470 | units | @ $63 per unit | |||||||
| Sept. | 10 | Sales | 650 | units | @ $80 per unit | |||||||
| Totals | 1,850 | units | 1,435 | units | ||||||||
Required:
1. Compute cost of goods available for sale and the number
of units available for sale.
2. Compute the number of units in ending
inventory.
3. Compute the cost assigned to ending inventory
using (a) FIFO, (b) LIFO, (c) weighted
average, and (d) specific identification. For specific
identification, units sold consist of 600 units from beginning
inventory, 380 from the February 10 purchase, 120 from the March 13
purchase, 130 from the August 21 purchase, and 205 from the
September 5 purchase.
4. Compute gross profit earned by the company for
each of the four costing methods. (Round your average cost
per unit to 2 decimal places.)
5. The company’s manager earns a bonus based on a
percent of gross profit. Which method of inventory costing produces
the highest bonus for the manager?
In: Accounting
Lamp Light Company maintains and repairs warning lights, such as those found on radio towers and lighthouses. Lamp Light Company prepared the following end-of-period spreadsheet at December 31, 2018, the end of the fiscal year:
| Lamp Light Company | ||||||
| End-of-Period Spreadsheet | ||||||
| For the Year Ended December 31, 2018 | ||||||
| Unadjusted Trial Balance | Adjustments | Adjusted Trial Balance | ||||
| Account Title | Dr. | Cr. | Dr. | Cr. | Dr. | Cr. |
| Cash | 10,800.00 | 10,800.00 | ||||
| Accounts Receivable | 38,900.00 | (a) 11,300.00 | 50,200.00 | |||
| Prepaid Insurance | 4,200.00 | (b) 3,000.00 | 1,200.00 | |||
| Supplies | 2,730.00 | (c) 2,250.00 | 480.00 | |||
| Land | 98,000.00 | 98,000.00 | ||||
| Building | 400,000.00 | 400,000.00 | ||||
| Accumulated Depreciation-Building | 205,300.00 | (d) 10,100.00 | 215,400.00 | |||
| Equipment | 101,000.00 | 101,000.00 | ||||
| Accumulated Depreciation-Equipment | 85,100.00 | (e) 6,680.00 | 91,780.00 | |||
| Accounts Payable | 15,700.00 | 15,700.00 | ||||
| Salaries and Wages Payable | (f) 4,900.00 | 4,900.00 | ||||
| Unearned Rent | 2,100.00 | (g) 1,300.00 | 800.00 | |||
| Common Stock | 75,000.00 | 75,000.00 | ||||
| Retained Earnings | 128,100.00 | 128,100.00 | ||||
| Dividends | 10,000.00 | 10,000.00 | ||||
| Fees Earned | 363,700.00 | (a) 11,300.00 | 375,000.00 | |||
| Rent Revenue | (g) 1,300.00 | 1,300.00 | ||||
| Salaries and Wages Expense | 163,100.00 | (f) 4,900.00 | 168,000.00 | |||
| Advertising Expense | 21,700.00 | 21,700.00 | ||||
| Utilities Expense | 11,400.00 | 11,400.00 | ||||
| Depreciation Expense-Building | (d) 10,100.00 | 10,100.00 | ||||
| Repairs Expense | 8,850.00 | 8,850.00 | ||||
| Depreciation Expense-Equipment | (e) 6,680.00 | 6,680.00 | ||||
| Insurance Expense | (b) 3,000.00 | 3,000.00 | ||||
| Supplies Expense | (c) 2,250.00 | 2,250.00 | ||||
| Miscellaneous Expense | 4,320.00 | 4,320.00 | ||||
| 875,000.00 | 875,000.00 | 39,530.00 | 39,530.00 | 907,980.00 | 907,980.00 | |
Required:
| 1. | Prepare an income statement for the year ended December 31, 2018. If a net loss has been incurred, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. Use the list of Labels and Amount Descriptions for the correct wording of text items other than account names. You will not need to enter colons (:) on the income statement. |
| 2. | Prepare a retained earnings statement for the year ended December 31, 2018. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Refer to the Chart of Accounts for exact wording of account titles. |
| 3. | Prepare a balance sheet as of December 31, 2018. Fixed assets must be entered in order according to account number. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Refer to the Chart of Accounts for exact wording of account titles. For those boxes in which you must enter subtracted or negative numbers use a minus sign. |
| 4. | Based upon the end-of-period spreadsheet, journalize the closing entries. Refer to the Chart of Accounts for exact wording of account titles. |
| 5. | Prepare a post-closing trial balance. |
In: Accounting
Vibrant Company had $980,000 of sales in each of Year 1, Year 2,
and Year 3, and it purchased merchandise costing $540,000 in each
of those years. It also maintained a $280,000 physical inventory
from the beginning to the end of that three-year period. In
accounting for inventory, it made an error at the end of Year 1
that caused its Year 1 ending inventory to appear on its statements
as $260,000 rather than the correct $280,000.
Required:
1. Determine the correct amount of the company’s gross
profit in each of Year 1, Year 2, and Year 3.
2. Prepare comparative income statements to show
the effect of this error on the company's cost of goods sold and
gross profit for each of Year 1, Year 2, and Year 3.
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In: Accounting
In: Accounting
MacLean Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at MacLean has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added when the assembly department process is10% complete. Conversion costs are added evenly during the assembly department's process. MacLean uses the weighted-average method of process costing. Consider the following data for the assembly department in April 2017:
| Physical Units (frames) | Direct Materials | Conversion Costs | |
| Work in process, April 1^a | 120 | $ 2,140 | $ 2,916 |
| Started during April 2017 | 485 | ||
| Completed during April 2017 | 445 | ||
| Work in process, April 30^b | 160 | ||
| Total costs added during April 2017 | $18,430 | $ 9,315 |
a Degree of completion: direct materials, 100%; conversion costs, 40%.
b Degree of completion: direct materials, 100%; conversion costs, 55%
Question:
|
1. |
Summarize total assembly department costs for April 2017, and assign them to units completed (and transferred out) and to units in ending work in process. |
|
2. |
What issues should a manager focus on when reviewing the equivalent unitscalculation? |
In: Accounting
Budget Performance Reports for A decentralized unit in which the department or division manager has responsibility for the control of costs incurred and the authority to make decisions that affect these costs.Cost Centers
Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow:
| Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 |
||||||||
| Plant | Budget | Actual | Over Budget | Under Budget | ||||
| Eastern Region | $422,700 | $422,700 | $0 | |||||
| Central Region | 304,300 | 301,300 | (3,000) | |||||
| Western Region | (g) | (h) | (i) | |||||
| $(j) | $(k) | $(l) | $(3,000) | |||||
| Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 |
||||||||
| Department | Budget | Actual | Over Budget | Under Budget | ||||
| Chip Fabrication | $(a) | $(b) | $(c) | |||||
| Electronic Assembly | 78,140 | 79,160 | 1,020 | |||||
| Final Assembly | 125,020 | 124,020 | $(1,000) | |||||
| $(d) | $(e) | $(f) | $(1,000) | |||||
| Garland Company Budget Performance Report—Supervisor, Chip Fabrication For the Month Ended November 30 |
||||||||
| Cost | Budget | Actual | Over Budget | Under Budget | ||||
| Factory wages | $29,520 | $31,590 | $2,070 | |||||
| Materials | 69,260 | 68,780 | $(480) | |||||
| Power and light | 4,070 | 4,840 | 770 | |||||
| Maintenance | 6,450 | 7,060 | 610 | |||||
| $109,300 | $112,270 | $3,450 | $(480) | |||||
a. Complete the budget performance reports by determining the correct amounts for the lettered spaces (a-l) as marked above.
| a. $ | g. $ |
| b. $ | h. $ |
| c. $ | i. $ |
| d. $ | j. $ |
| e. $ | k. $ |
| f. $ | l. $ |
b. Complete the following memo to Cassandra Reid, vice president of production for Garland Company, explaining the performance of the production division for November.
MEMO
To: Cassandra Reid, Vice President of Production
The Western Region
Feedback
a. Solve for (a) & (b) from the totals for the Chip Fabrication Report.
Solve for (c) and the remaining amounts. Amounts (d) and (g) will be the same; amounts (e) and (h) will be the same; and amounts (i) and (l) will be the same.
b. Review what is happening within the regions and how they are performing within their budgets. Discuss possible causes for the budget overruns.
Learning Objective 2.
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In: Accounting
The National Overnight (NatO) company provides express small package delivery overnight. Airplanes arrive 24 hours a day at the national hub in Dallas where their contents are unloaded onto cargo vans each capable of holding 1,000 packages. The cargo vans transport the packages to the sorting center. The sorting center has a large storage area designed to hold up to 50,000 packages. After being sorted, another fleet of cargo vans transports the packages to the outgoing planes. However, the following information details the receiving process only. During the night (6 p.m. to 6 a.m.), airplanes arrive at a high rate providing a continuous arrival flow of packages with an average rate of 25,000 packages per hour. However, during the day (6 a.m. to 6 p.m.) air landings are less frequent, resulting in an average arrival rate of 5,000 packages per hour. NatO runs two 12-hour shifts at the sorting center: the night shift starts at 8 p.m. and leaves by 8 a.m. The night shift has the largest number of employees and can process up to 21,000 packages per hour. The day shift, on the other hand, is smaller and can process up to 12,000 packages per hour from 8 a.m. to 8 p.m. It is known that the cargo vans typically had to wait to unload at the sorting center during some portions of the night shift. Cargo van drivers were paid $10/hour, benefits included. NatO begins each night with completely empty storage bins at 6 p.m. Cargo vans begin waiting as soon as the storage area is full. What is the maximum number of cargo vans waiting in line at any given during a 24-hour period? Input your answer as a whole integer such as "17" or "9". If capacity is such that no vans ever have to wait then input "0".
In: Accounting