Logistical Logistics Inc. (Logistical Logistics or the “Company”) provides transportation and logistics services to customers throughout a network of offices in North America, South America, and Asia. The Company contracts fleets of shipping vessels, trucks, and aircraft to provide regional, long-haul, and international shipments of customer goods. In addition, the Company contracts warehouse operators across North America for use of their facilities as distribution centers that temporarily store goods in transit. Assume the Company has adopted the new leasing standard, ASC 842, Leases.
The Company has entered into the following contracts with the vendors identified below.
Logistical Logistics enters into a contract with See Boat Inc. (See Boat) to use its shipping vessels to transport customer goods from North America to Asia. See Boat has a fleet of 25 multi-use shipping vessels, each of which has the capacity to hold 1,000 shipping containers.
Logistical Logistics enters into a contract with Fly-By-Air Inc. (Fly-By-Air) to use its aircraft to transport customer goods from South America to North America. Fly-By-Air has a fleet of 50 multi-use aircraft, each of which has the capacity to hold 500 shipping pallets of customer goods.
Logistical Logistics enters into a contract with Trucking Co. Inc. (Trucking Co.) to use its trucks to transport customer goods from distribution centers to retail stores across North America.
Trucking Co. has a fleet of 1,500 multi-use long-haul trucking carriers, each of which has the capacity to hold 100 shipping pallets of goods.
Logistical Logistics enters into a contract with Warehouse Co. Inc. (Warehouse Co.) to store up to 18,000 shipping pallets of customer goods at one of Warehouse Co.’s locations. Warehouse Co. has the capacity to store 20,000 shipping pallets of goods.
The terms of the shipping contracts are as follows:
• See Boat
o See Boat is responsible for the safe passage of the cargo, as well as operation and maintenance of SB0829. The crew determines the ship’s route, speeds, and date of departure from Los Angeles. In addition, Logistical Logistics cannot, under any circumstances, replace See Boat’s crew.
The contract term is five years
o FBA1231, a commercial aircraft in Fly-By-Air’s fleet, is dedicated to delivering Logistical Logistics’ shipping pallets during the term of the contract.
o Logistical Logistics determines (1) the airports from and to which goods are shipped and received and (2) the order in which deliveries are made to the airports. Fly-By-Air provides the aircraft’s pilot and crew, and Logistical Logistics instructs Fly-By-Air accordingly.
o While Logistical Logistics determines what cargo will be transported throughout the term of the contract, certain restrictions prevent the Company from shipping flammable materials.
o Logistical Logistics has the right to send the aircraft regardless of whether its cargo levels meet the full storage capacity of the aircraft. If FBA1231 is below capacity, Fly-By-Air cannot use the excess storage space to ship products of its othercustomers.
• Trucking Co.
• Warehouse Co.
Logistical Logistics can store up to 18,000 shipping pallets at one specified Warehouse Co. location. Logistical Logistics will be charged for storage of 18,000 shipping pallet
The CFO of Logistical Logistics recognizes that the new leasing standard contains certain provisions that may affect how the Company treats contracts of this nature.
Note that you have been provided with Handout 1, which contains the risks of material misstatement (RoMMs) matrix, and Handout 2, which is Logistical Logistics’ control matrix.
Handout 1
|
RoMM No. |
RoMM Description |
|
1 |
Right-of-use (ROU) assets and lease liabilities are not valued correctly, on the basis of the underlying assumptions (e.g., lease terms, discount rate, lease payments) and classification of the lease (i.e., operating or financing). |
|
2 |
Lease expense recorded does not represent valid expense. |
|
3 |
Contracts or arrangements containing a lease are not identified as a lease. |
|
4 |
The lease is not appropriately classified on the basis of the criteria under ASC 842. |
|
5 |
The entity identifies ROU assets and lease liabilities for which it does not have the rights or obligations to. |
|
6 |
Contracts or arrangements are determined to be a lease when the criteria under ASC 842 have not been met. |
|
7 |
Impairment indicators may exist for ROU assets, but are not known to management. |
|
8 |
Lease expense is not recorded (1) at correct amounts, (2) in the proper accounts, or (3) in the proper period. |
Handout 2
|
Control No. |
Control Title |
Control Description |
|
L 1 |
Contract Review — Contract database is reviewed by each department leader. |
On a quarterly basis, each department leader (e.g., Sales, Treasury, Human Resources, IT, Tax), with appropriate knowledge of the contracts entered into by his or her department, reviews the database to verify that (1) all contracts (i.e., new, existing, or modified), in accordance with the entity’s accounting policies, have been included in the database and (2) all events or circumstances requiring reassessment have been identified. Each department leader provides representation to the Lease Accountant of the completeness and accuracy of the database, as well as, the contracts identified that require reassessment to the best of his or her knowledge. |
|
L 2 |
Lease Terms Review — Controller reviews and approves the key contract terms entered into the lease software. |
The Controller, with appropriate knowledge of the entity’s lease arrangements and the accounting framework and principles under the requirements of ASC 842, reviews the contract listing (e.g., contract database extract) to verify that all the key contract terms for the entity’s lease arrangements were entered by the Lease Accountant into the lease software. The Controller will verify the completeness and accuracy of the contract listing (e.g., contract database extract) by reviewing key terms against the lease contracts. Any differences identified as a result of the Controller’s review are investigated and resolved, and all questions are addressed. The Controller then approves and signs off on the contract listing (e.g., contract database extract). |
|
L 3 |
Review of Reconciliations — Controller reviews and approves all general ledger reconciliations for the lease specific accounts. |
The Controller reviews the lease account balance reconciliations, on a quarterly basis, along with the detailed lease analysis supporting the amounts recorded, as prepared by the Lease Accountant. After performing the review, any differences identified as a result of the review are investigated and resolved, and all questions are addressed. The Controller then approves and signs off on the lease account balance reconciliations. |
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Define each of the following terms below. who, what, where, and when, then explain why they are important.
Manuel Noriega
Proposition 63
Ross Perot
Welfare Reform Act
Kenneth Starr
Mikhail Gorbachev
North American Free Trade Agreement
"ethnic cleansing"
Contract with America
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Use CYGWIN TERMINAL to create this script. COPY AND
PASTE the screenshot.
Script 1:
1. Perform a ls -al on the files within the user's home
directory and save it to a file called ls.dat within your ~
directory
2. Save the tree information for the /home directory in
a file called tree.dat within your ~directory
3. Create a new directory in your home directory called
"backups"
4. Move the files you just created to the new
directory
5. Rename the files that you just moved to "ls.bu" and
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These Series M Notes are described as: Series M Notes, interest rate of 3.4%, face amount of $350, maturing October 15, 2020 (effective interest rate of 3.6%)
(a) What journal entry would have been recorded in the third quarter of 2013 to record the issuance of the Series M Notes?
(b) Record the interest payment and interest expense on April 15 and October 15, 2014. Assume the effective interest method, and record your responses to the nearest thousand dollars.
April 15:
October 15:
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