Question 11
The following facts pertain to a non-cancelable lease agreement
between Carla Vista Leasing Company and Tamarisk Company, a
lessee.
| Commencement date | May 1, 2020 | ||
| Annual lease payment due at the beginning of | |||
| each year, beginning with May 1, 2020 | $15,138.16 | ||
| Bargain purchase option price at end of lease term | $4,000 | ||
| Lease term | 5 | years | |
| Economic life of leased equipment | 10 | years | |
| Lessor’s cost | $50,000 | ||
| Fair value of asset at May 1, 2020 | $68,000 | ||
| Lessor’s implicit rate | 8 | % | |
| Lessee’s incremental borrowing rate | 8 | % |
The collectibility of the lease payments by Carla Vista is
probable.
1. Discuss the nature of this lease to Tamarisk
2. Discuss the nature of this lease to Carla Vista.
3. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Tamarisk’s annual accounting period ends on December 31. Reversing entries are used by Tamarisk. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15. Record journal entries in the order presented in the problem.)
In: Accounting
2019 is the first year of operation for Flitz Company. Applicable tax rates enacted by the end of 2018 are as follows:2019 25%2020 20%2021 and later 30%Compute the amount of deferred taxes to appear on the balance sheet at 12/31/19 with proper classifications, prepare the journal entry to record income tax expense for 2019, and show the current and deferred portions of income tax expense on the income statement for 2019.(a) In 2019 Flitz had pre-tax financial income of $450,000.(b) Pre-tax financial income was different from taxable income due to the following:Depreciation, the straight-line method for financial purpose while MACRS is used for tax purpose 35,000(tax-deductible in 2019, expense in 2020 20,000 in 2021 15,000)Fine for pollution 8,000(not tax-deductible, expense in 2019) Revenue received in advance 14,000(taxable 2019, revenue in 2020)Revenue from investment on equity method for financial purpose and cost method is used for tax purpose 10,000(revenue in 2019, taxable in 2020) Litigation accrual 80,000(expense in 2019, tax-deductible in 2022)Interest received on municipal bonds 6,000(revenue in 2019, not taxable)
In: Accounting
Stevens Ltd is the leading retailer of Gym equipment. The following information occurred during May 2020. Stevens Ltd had an opening inventory balance of $8,400,000.
May
1 Returned to the suppliers $80,000 of the opening inventory and received cash.
12 Purchased additional inventory on credit from the supplier for $12,000,000.
18 Sold inventory for $6,000,000 cash (Cost price to Stevens Ltd $2,400,000).
19 Paid the suppliers the account from 12 May.
31 The closing stocktake at year-end revealed an inventory balance of $17,800,000.
Required:
In: Accounting
Stevens Ltd is the leading retailer of Gym equipment. The following information occurred during May 2020. Stevens Ltd had an opening inventory balance of $8,400,000.
May
1 Returned to the suppliers $80,000 of the opening inventory and received cash.
12 Purchased additional inventory on credit from the supplier for $12,000,000.
18 Sold inventory for $6,000,000 cash (Cost price to Stevens Ltd $2,400,000).
19 Paid the suppliers the account from 12 May.
31 The closing stocktake at year-end revealed an inventory balance of $17,800,000.
Required:
I need this ASAP.
In: Accounting
3. The classical dichotomy and the neutrality of money
The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction.
Amy spends all of her money on paperback novels and mandarins. In 2015, she earned $18.00 per hour, the price of a paperback novel was $9.00, and the price of a mandarin was $1.00.
Which of the following give the nominal value of a variable? Check all that apply.
Amy's wage is 2 paperback novels per hour in 2015.
Amy's wage is $18.00 per hour in 2015.
The price of a mandarin is $1.00 in 2015.
Which of the following give the real value of a variable? Check all that apply.
Amy's wage is $18.00 per hour in 2015.
Amy's wage is 18 mandarins per hour in 2015.
The price of a paperback novel is 9 mandarins in 2015.
Suppose that the Fed sharply increases the money supply between 2015 and 2020. In 2020, Amy's wage has risen to $36.00 per hour. The price of a paperback novel is $18.00 and the price of a mandarin is $2.00.
In 2020, the relative price of a paperback novel is .
Between 2015 and 2020, the nominal value of Amy's wage , and the real value of her wage .
Monetary neutrality is the proposition that a change in the money supply nominal variables and real
In: Economics
The Lynbrook Rentals Company offers credit terms to all of its customers. At the end of 2019, accounts receivables totaled $3,400,000. During 2020 credit sales were $2,100,000 and cash collections from customers were $3,700,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2020 and $70,000 in receivables were written off during the year as uncollectible. In addition, $20,000 was collected from a customer whose account was written off in 2019. The allowance for uncollectible accounts is determined by an ageing of accounts receivable. An aging of accounts receivable at December 31, 2020, reveals the following:
Age Group 0-60 days 61-90 days 91-120 days Over 120 days
Required:
Percentage of Year-end Percent Receivable in Group Uncollectible
55% 5% 30 15 10 45 5 60
a. Prepare journal entries to record the write-off of
receivables, collection of the accounts receivable previously
written off, and the year-end adjusting entry for bad debt
expense.
b. Show how accounts receivables would be presented in the 2020
year-end balance sheet?
In: Accounting
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In: Accounting
On June 1, 2020, JetCom Inventors Inc. issued a $480,000 8%,
three-year bond. Interest is to be paid semiannually beginning
December 1, 2020.
Required:
a. Calculate the issue price of the bond assuming a market
interest rate of 9%. (Do not round intermediate
calculations. Round the final answer to the nearest whole
dollar.)
b. Using the effective interest method, prepare an
amortization schedule. (Do not round intermediate
calculations. Round the final answers to the nearest whole dollar.
Enter all the amounts as positive values.)
Part 1
Prepare journal entries to the following. (Do not round
intermediate calculations. Round the final answers to the nearest
whole dollar.)
a. Issuance of the bonds on June 1, 2020
b. Payment of interest on December 1, 2020
c. Adjusting entry to accrue bond interest and
discount amortization on January 31, 2021
d. Payment of interest on June 1, 2021
Assume JetCom Inventors Inc. has a January 31 year-end.
Part 2
Show how the bonds will appear on the balance sheet under
non-current liabilities at January 31, 2022. (Do not round
intermediate calculations. Round the final answers to the nearest
whole dollar.)
In: Accounting
Errors and Adjusting Entries Use the following information to record necessary end of period journal entries:
A man came into Cutting Edge on 31 March 2020 to pay for repairs to his mower which he will bring in later. He paid $2,500 cash. The mower was arranged to be delivered to Cutting Edge on 10 April, 2020.
Repair services of $6,250 were provided on 31 March 2020 but have not yet been recorded in the transactions. Payment has not yet been received.
Billy-Bob did a count of the stock on hand of Workshop Supplies. He realised that only $5,500 of Workshop Supplies were used in March, instead of $7,000 as recorded on 31 March 2020 (in Practice Set 2).
Jimmy-James’ last wages payment was on Friday 20 March. The next $1,000 fortnightly payment is on Friday 3 April. Jimmy-James only works Monday to Friday, being 10 days per fortnight.
Annual insurance of $1,200 was paid on 1 February and recorded in the Prepaid Insurance account.
From all sources of revenue (Sales Revenue and Service Revenue), $70,730 was cash sales.
Add any other necessary adjusting entries based on the information provided under the accounting policies and procedures.
In: Accounting
6.
The stockholders' equity account balances of Kay Corporation
for 2020 are given below:
January 1 December 31
Common stock ...................... 648,000 720,000
Paid-in capital – common stock .... 540,000 594,000
Treasury stock .................... 160,000 36,800
Paid-in capital – treasury stock .. 5,000 ?
Retained earnings ................. 425,000 ?
The common stock account at January 1 consisted of 54,000 shares
that were outstanding at a $12 par value per share.
The treasury stock account at January 1 consisted of 10,000 shares
that had been re-acquired at a $16 cost per share.
During 2020, Kay Corporation entered into the following transactions:
March 23 Re-issued 2,400 of the treasury shares for $22 per share
June 9 Re-issued 3,700 of the treasury shares for $13 per share
August 15 Issued 6,000 shares of previously un-issued common stock
November 2 Re-issued 1,600 of the treasury shares for $14 per share
December 18 Declared and paid a $3.75 dividend per share on the
outstanding shares of common stock
Kay Corporation reported a net income of $293,760 for 2020.
Calculate the retained earnings account balance at December 31, 2020.In: Accounting