What are the answers? Royals Incorporated leases a piece of equipment to Polar Corporation on January 1, 2017. The lease agreement called for annual rental payments of $8,648 at the beginning of each year of the 3-year lease. The equipment has a fair value of $35,000, a book value of $20,000, and an economic useful life of 5 years after which the residual value will be zero. Both parties expect a residual value of $12,500 at the end of the lease term, though this amount is not guaranteed. Royals set the lease payments with the intent of earning a 6% return, and Polar is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. PV Annuity Due PV Ordinary Annuity PV Single Sum 6%, 3 periods 2.83339 2.67301 .83962 6%, 5 periods 4.46511 4.21236 .74726 (

a) Describe the nature of the lease to Polar.

(b) Prepare all necessary journal entries for Polar in 2017.

(c)Show how the rental payment is determined by lessor (show your works).

(d)Suppose that the residual value is guaranteed by Polar. All other facts being equal, how would Royals change the amount of the annual rental payment?

What can we say about the increase of the dividend payout ratio for a company.Is it a good sign and which is the impact on the free cash flows?

Whitt Valley Presbyterian Hospital is a nonprofit initial care facility. For the hospital’s calendar year ending December 31, 2019, prepare (I) journal entries to record the transactions listed in a. through n. below, (II) a trial balance based on your entries and the beginning balances listed at o. below, and (III) a Statement of Operations and a Statement of Changes in Net Assets for the hospital.

1. Third-parties payers and direct-pay patients were billed $6,500,000 at the hospital's established billing rates
2. The hospital determined that certain of its patients qualified for charity care and that it would not seek to collect $950,000 at established billing rates from direct-pay patients
3. The hospital estimated contractual adjustments for the year of $1,600,000
4. The hospital originally estimated uncollectible amounts from direct-pay patients to be $250,000 (recall that original estimated uncollectible amounts reduce revenue; only estimates specific to an individual patient are reported as bad debt expense).
5. The hospital received capitation premiums of $2,500,000. It estimated that the cost of providing this care was $1,800,000
6. The hospital received payments from third-party payers and direct-pay patients totaling $3,500,000
7. The hospital received contributions of $1,100,000 that were restricted by donors for building a new urgent care wing
8. The hospital paid salaries and wages of $4,500,000 in cash; these amounts are reported as patient care expense
9. The fair value of investments required to be held in perpetuity increased by $25,000
10. The hospital received cash from interest and dividend income of $10,000 on investments without donor restrictions
11. The hospital used $1,375,000 of net assets with donor restrictions to construct a new urgent care wing, consistent with the restrictions created by the donors
12. The hospital reported depreciation expense of $475,000
13. The hospital used drug inventories of $365,000
14. The hospital incurred other operating costs for patient care of $275,000 on credit
15. The hospital’s beginning of the year trial balance at January 1, 2019 was as follows:

Whitt Valley Presbyterian Hospital
Trial Balance
As of January 1, 2019

1.a.)When using FIFO for inventories, market value generally refers to ________ under U.S. GAAP and ________ under IFRS.

A) current replacement cost; historical cost

B) historical cost; net realizable value

C) historical cost; current replacement cost

D) net realizable value; net realizable value

b. Margaret Company reported the following information for the current year:

Industry Averages available are:

How do the inventory turnover and gross profit percentage for Margaret Company compare to the industry averages for the same ratios? (Round inventory turnover to two decimal places. Round gross profit percentage to the nearest percent.)

A) Margaret Company has superior gross profit percentage and inventory turnover.

B) Margaret Company has superior gross profit percentage and inferior inventory turnover.

C) Margaret Company has inferior gross profit percentage and superior inventory turnover.

D) Margaret Company has inferior gross profit percentage and inventory turnover.

c.)Ending inventory for the year ended December 31, 2019, is understated by $8,000. How will this affect net income for 2019 and 2020?

A) Net income will be understated by $8,000 in 2019 and 2020.

B) Net income will be overstated by $8,000 in 2019 and 2020.

C) Net income will be understated by $8,000 in 2019 and overstated by $8,000 in 2020.

D) Net income will be overstated by $8,000 in 2019 and understated by $8,000 in 2020.

d.) Ending inventory for the year ended December 31, 2019, is understated by $23,000. How will this error affect net income for 2020?

A) Net income will be understated by $46,000.

B) Net income will be overstated by $46,000.

C) Net income will be understated by $23,000.

D) Net income will be overstated by $23,000.

e.) Beginning inventory for the year ended December 31, 2019, is understated. How will this error affect net income for 2019 and 2020?

A) 2019 overstated; 2020 understated

B) 2019 understated; 2020 overstated

C) 2019 overstated; 2020 no effect

D) 2019 understated; 2020 no effect

f.)Beginning inventory for the year ended December 31, 2019, is understated. How will this error affect net income for 2019 and 2020?

A) 2019 overstated; 2020 understated

B) 2019 understated; 2020 overstated

C) 2019 overstated; 2020 no effect

D) 2019 understated; 2020 no effect

A not-for-profit organization receives a restricted gift. When and in which type of fund should it recognize the revenue? When and in which type of fund should it recognize the related expense? What is the reason for the apparent inconsistencies between the fund types in which the revenue and expenses are reported?

1. Audit sampling requires that the auditor collect only a relatively small sub-sample of data, thereby initiating detection risk, i.e., the risk. . . that, based on the sample the auditor takes, the auditor will fail to detect a material misstatement in the financial statements. Data analytics seems to present a panacea to that notion of risk because, by auditing 100% of the sample, detection risk by definition is lower.
   1. It seems like data analytics is the perfect answer to the audit risk problem. So, comment on a variety of reasons that auditors might not be willing to rely on data analytics to drive audit risk down.
   2. Which do you think is costlier: sampling or data analytics? What are the different costs between sampling and data analytics?
   3. What role does cost-benefit play in the choice between employing statistical sampling versus data analytics?
2. Data analytics enables auditors to audit all transactions, rather than just a sample of transactions.
   1. Do you think that as the use of data analytics increases on audit engagements, the need for sampling will decrease?
   2. What role might the PCAOB or AICPA play in helping auditors determine when and how to incorporate data analytics into the audit?

Discuss the importance of ethics in financial accounting.

What issues may arise if ethics is compromised? How would this impact the company internally, how would it impact the external users such as investors, creditors, government?

Transactions of Sky Company for the month of December 2017 are presented below: 1. The owner invested $400,000 to start his business. 2. Purchased equipment for $48,000, paying $12,000 cash and the remaining amount will be paid after 10 days. 3. Purchased office supplies on credit for $3,200. 4. Invested additional $160,000 cash in the business. 5. Services billed to customers amounted to $20,000. 6. Received a bill for $1,200 for advertising of the current month. 7. Paid $10,000 as salaries of the month. 8. The owner withdrew $1,400 cash from the business for his personal use. Required: a. Using the following table, show the effect of the above transactions on the accounting equation b. Prepare the income statement, statement of owner’s equity, and balance sheet of Sky Company on 31 December 2017

Helix Company purchased tool sharpening equipment in April 1, 2010 for $72,000. The equipment was expected to have a useful life of four years, or 9,000 operating hours, and a residual value of $2,700. The equipment was used for 2,400 hours during 2010, 4,000 hours in 2011, 2,000 hours in 2012, and 600 hours in 2013.

Instructions: Determine the amount of depreciation expense for the years ended December 31, 2010, 2011, 2012, and 2013 by each of the following methods:

1. Straight-line

2. The units of activity method

3. Double Declining balance method

Turner Video will invest $84,500 in a project. The firm’s cost of capital is 6 percent. The investment will provide the following inflows. Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods.

The internal rate of return is 12 percent.

a. If the reinvestment assumption of the net present value method is used, what will be the total value of the inflows after five years? (Assume the inflows come at the end of each year.) (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

Total value of inflows: ___________________.

b. If the reinvestment assumption of the internal rate of return method is used, what will be the total value of the inflows after five years? (Use the given internal rate of return. Do not round intermediate calculations and round your answer to 2 decimal places.)
  

Total value of inflows: ___________________.

c. Which investment assumption is better?

a large hotel​ chain, has been using​ activity-based costing to determine the cost of a​ night's stay at their hotels.

One of the​ activities, "Inspection," occurs after a customer has checked out of a hotel room.

Fitzgerald

inspects every

10th

room and has been using​ "number of rooms​ inspected" as the cost driver for inspection costs. A significant component of inspection costs is the cost of the supplies used in each inspection.

Dawn

McAdams​,

the chief​ inspector, is wondering whether inspection​ labor-hours might be a better cost driver for inspection costs.

Dawn

gathers information for weekly inspection​ costs, rooms​ inspected, and inspection​ labor-hours as​ follows:

Dawn

runs regressions on each of the possible cost drivers and estimates these cost​ functions:

                                               Inspection

Costs=$246.60

​+

​($6.17

x Number of rooms​ inspected)

                                               Inspection

Costs=$787.71

​+

​($11.94

x Inspection​ labor-hours)

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
  

a. Determine the net present value of the projects based on a zero percent discount rate.

Project E - ____________________

Project H - _____________________

b. Determine the net present value of the projects based on a discount rate of 9 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)
  

Project E - ____________________

Project H - _____________________

c. If the projects are not mutually exclusive, which project(s) would you accept if the discount rate is 9 percent?
  

During the first month of its current fiscal year, Green Co. incurred repair costs of $24,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $164,000 for the current year.

a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year.

b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $932,000 and $1,012,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place.)

c. Indicate the effect on ROI of subsequent years if the error is not corrected.

Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

It is expected that 21,400 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 26,000 units.

Income Statement

A. Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Additional Questions

B. What is the expected contribution margin ratio?

C. Determine the break-even sales in units and dollars. Start by using the contribution margin ratio (part B.) and then round your answers to the nearest whole number.

D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?

$

Final Questions

E. What is the expected margin of safety in dollars and as a percentage of sales? If applicable, use amounts previously computed and then round your answers to the nearest whole number.

F. Determine the operating leverage. Round to one decimal place.

18.(Determination of property tax rate)The City of Weston is preparing its budget for calendar year 2009. After estimating revenues from all other sources, the City calculates that it must raise $7,000,000 from property taxes. You are given the following information regarding the tax rate:

a. Compute the gross amount of property taxes required to be levied.

b. Compute the tax rate per $100 of net assessed valuation.

c. Determine the amount of property tax that a home owner whose property is assessed at $35,000 will have to pay.