Depreciation and advance prepayments

Pan Asia Airlines was founded in 1980. Headquartered in Hong Kong, the publicly traded company has routes throughout Asia and to major airports throughout Europe and North America. While Pan Asia charges a premium of 10 to 20% over its competitors, customers have not been deterred from using the airline because of the high quality of service.

A key reason for this reputation for high quality is the company's relatively young fleet of aircraft, with an average age of five years and no plane older than eight years. To maintain a young fleet, Pan Asia replaces its planes regularly to ensure that the planes are equipped with the latest technology and operate efficiently. Other airlines typically have fleets with an average age of 10 years, while discount airlines have even older fleets, with an average age of 15 years. A well-maintained aircraft can last for 20 to 25 years, or even more in some cases.

Each of five regional managers has responsibility for all investment and operating decisions for his/her region. The company evaluates each region as a profit centre. The decentralized structure allows each region to respond quickly to changes in its market.

Financially, the company has been consistently profitable in recent years. Stock analysts have projected a target price that is 20% higher than the current price of $32.50 per share, based on their projections of earnings before interest, taxes, depreciation, amortization (EBITDA). Because of its solid financial performance, Pan Asia has earned a high credit rating, allowing it to borrow at a rate of 6%. Debt currently comprises about 40% of assets, while liquid assets amount to about 10% of assets, which total approximately $2 billion.

It is now February 2012. A new chief executive officer (CEO), William Chan, has been appointed following the retirement of the founding CEO. Chan has a background in mechanical engineering and previously served as Pan Asia's chief operating officer for the past 15 years. While Chan has a thorough understanding of the company's central operations, he is less familiar with other aspects of the company. Consequently, he has spent the last three months reviewing the company's marketing program, human resources, information systems, treasury, as well as accounting.

During this review, Chan has identified a few issues that he would like you, the chief financial officer, to explain to him.

1. The CEO noted that Pan Asia uses the declining-balance method of depreciation. He also noted that many (though not all) competitors use the straight-line method. He wonders whether Pan Asia should consider conforming to the majority in the industry.

2. One of Pan Asia’s manufacturers has recently started a promotion that offers a significant discount to airlines that make advance payments on their aircraft orders. The discount amounts to 15% of the regular price. To obtain the discount, Pan Asia would need to pay in full when it orders a plane, rather than when the manufacturer delivers it. Typically, the amount of time between order and delivery is two years. Chan is unsure whether he should encourage the regional managers to take up this offer. He is also wondering what the effects might be for the financial statements.

Required: Draft a memo to the CEO that addresses the issues raised.

SQL Trigger problem

When attemptiing to Create or Replace a trigger I get the error "sql warning trigger created with compilation errors".

Trigger:

CREATE OR REPLACE TRIGGER Late_Fees
after UPDATE
ON InventoryItem
FOR EACH ROW

DECLARE

late_fee number;
num_days number;
BEGIN
num_days:= to_date(:old.ReturnDate)-TO_DATE(:old.DateDue);
select IntValue into late_fee from ApplicationSettings where Setting='Daily Late Fee';
:new.fee := (late_fee)*(num_days);

END;
/

commit;

Table:

create table Rental(
INVID int Primary key,
LoanDate date,
PatronID int,
DueDate date,
ReturnDate date,
constraint PatronID_FK Foreign key (PatronID) references Patrons(PatronID));

Test Input:

insert into rental
values ('1345', '2020-02-20', '000', '2020-02-27', '2020-02-22');
insert into rental
values ('1345', '2020-04-10', '000', '2020-04-17', '2020-04-17');
insert into rental
values ('1234', '2020-02-20', '000', '2020-02-27', '2020-02-22');
insert into rental
values ('1245', '2020-02-20', '000', '2020-02-27', '2020-02-22');
insert into rental
values ('1345', '2020-08-14', '0001', '2020-08-21', '2020-08-20');
insert into rental
values ('1265', '2020-09-01', '0001', '2020-09-08', '2020-09-10');

Meatloaf Limited is a producer of food products that was established in 2015. The company is subject to U.S. federal taxes.

In its first year of operations, Meatloaf Limited made a loss of $100,000. In 2016, the company made a profit of $200,000. In 2017, Meatloaf Limited made a large loss of $300,000.

At the end of 2017, the company also had deferred tax liabilities of $40,000 on its books. Looking forward, the company expects to earn substantial pre-tax profits in future years.

During 2018, the enacted corporate tax rate changed from 40% to 35%. There were no other changes to the company’s deferred taxes during 2018.

Using the Codification, how will the company account for these transactions?

Timmins Company of Emporia, Kansas, spreads herbicides and applies liquid fertilizer for local farmers. On May 31, 2020, the company’s Cash account per its general ledger showed a balance of $6,100.50.
The bank statement from Emporia State Bank on that date showed the following balance.

A comparison of the details on the bank statement with the details in the Cash account revealed the following facts.

The personal savings rate in Asian countries is often much higher than in Europe or the U.S. For instance, the personal savings rate in the U.S. is around 5%, while the same rate in China is around 30%. What impact will this have on the growth of capital stock in the U.S. vs. China?

In the above question, suppose that savers in China decide to put a significant portion of their savings into financial instruments in the U.S. For example, suppose they decide to buy U.S. government bonds and the bonds of U.S. companies in order to invest their savings. How would that affect the growth of capital stock in the U.S. relative to China?

The U.S. BoP statistic for the year 2008 shows unilateral transfers as a debit entry. This implies:

a. more transfers are made from the U.S. to individuals abroad.

b. more transfers are made to the U.S. from individuals abroad.

c. U.S. investors have earned a higher rate of return on foreign assets.

d. U.S. companies have invested in large number of foreign stocks.

e. the U.S. government has bought back some Treasury bonds.

Brick Ltd is a building construction company. On 1July 2017, Brick Ltd signed a contract with Pear Ltd to build a factory. The contract price was $ 12,000,000. The relevant information is as follows:

Pear Ltd will be in control of the asset throughout the construction process. The contract is completed on 30 June 2020. Brick Ltd has a financial year ending 30 June. Assume that the actual costs and cash collections are in line with expectations and the stage of completion can be reliably estimated.

Required:

1. Calculate the total profit that will be recognised in the books of Brick Ltd for the year ended 30 June 2018, 2019 and 2020.                                                                                                                   
   

The profit that you have calculated in Part (a) above, is it based on input method or output method? Justify your answer based on AASB 15 “Revenue from Contracts with Customer

Blue Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $169,800. The company estimated that the machine would have a salvage value of $16,800 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.) (a) Straight-line depreciation for 2020 $enter a dollar amount (b) Activity method for 2020, assuming that machine usage was 800 hours $enter a dollar amount (c) Sum-of-the-years'-digits for 2021 $enter a dollar amount (d) Double-declining-balance for 2021

Marigold Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $127,500. The company estimated that the machine would have a salvage value of $10,500 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31.

Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)

(a)      
Straight-line depreciation for 2020
$enter a dollar amount
(b)      
Activity method for 2020, assuming that machine usage was 880 hours
$enter a dollar amount
(c)      
Sum-of-the-years'-digits for 2021
$enter a dollar amount
(d)      
Double-declining-balance for 2021