On January 1, 2020, Nivtop Corp. leased a machine from Nosnah Inc. The lease agreement calls for
Nivtop to make four annual lease payments of $559,113 each January 1, with the first payment to be
made on January 1, 2020. Nivtop’s incremental borrowing rate is 8%; this is the same rate Nosnah
used to calculate the lease payments. The fair market value of the machine is $2,000,000 and its
expected useful life is 5 years. This is a non-specialized machine.
Nosnah purchased the machine from a vendor on December 31, 2019 for $1,573,000.
Required
a. List the 5 criteria used to determine whether a lease qualifies as finance/sales-type or
operating. Review each criterion to determine which (if any) this lease meets.
b. What type of lease is this for Nivtop?
c. What type of lease is this for Nosnah?
d. Show all of Nivtop’s journal entries relative to this lease at
1) January 1, 2020
2) December 31, 2020
3) January 1, 2021
e. Show all of Nosnah’s journal entries relative to this lease at
1) January 1, 2020
2) December 31, 2020
3) January 1, 2021

On January 1, 2018, Worchester Construction leased International Harvester equipment from Newton LeaseCorp. Newton LeaseCorp purchased the equipment from Wellesley Harvester at a cost of $999,738. Worchester borrowing rate for similar transactions is 10%.

The lease agreement specified four annual payments of $197,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2020. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $686,910.

On January 1, 2020 (after two years and three payments), the Worchester and Newton agreed to extend the lease term by two years. The market rate of interest at that time was 9%.

Required:

1. Prepare the appropriate entries for Worchester Construction on January 1, 2020, to adjust its lease liability for the lease modification.
2. Prepare all appropriate entries for Newton LeaseCorp on January 1, 2020, to record the lease modification.
3. Prepare all appropriate entries for Worchester Construction on December 31, 2020, related to the lease.
4. Prepare all appropriate entries for on December 31, 2020, related to the lease.

P11.16 Sung Corporation, a manufacturer of steel products, began operations on October 1, 2019. Sung's accounting department has begun to prepare the capital asset and depreciation schedule that follows. You have been asked to assist in completing this schedule. In addition to determining that the data already on the schedule are correct, you have obtained the following information from the company's records and personnel:

• 1. Depreciation is calculated from the first day of the month of acquisition to the first day of the month of disposition.
• 2. Land A and Building A were acquired together for $820,000. At the time of acquisition, the land had an appraised value of $90,000 and the building had an appraised value of $810,000.
• 3. Land B was acquired on October 2, 2019, in exchange for 2,500 newly issued common shares. At the date of acquisition, the shares had a fair value of $30 each. During October 2019, Sung paid $16,000 to demolish an existing building on this land so that it could construct a new building.
• 4. Construction of Building B on the newly acquired land began on October 1, 2020. By September 30, 2021, Sung had paid $320,000 of the estimated total construction costs of $450,000. It is estimated that the building will be completed and occupied by July 2022.
• 5. Certain equipment was donated to the corporation by a local university. An independent appraisal of the equipment when it was donated estimated its fair value at $30,000 and the residual value at $3,000.
• 6. Machine A's total cost of $164,900 includes an installation expense of $600 and normal repairs and maintenance of $14,900. Its residual value is estimated at $6,000. Machine A was sold on February 1, 2021.
• 7. On October 1, 2020, Machine B was acquired with a down payment of $5,740 and the remaining payments to be made in 11 annual instalments of $6,000 each, beginning October 1, 2020. The prevailing interest rate was 8%. The following data were determined from present-value tables and are rounded:

  PV of $1 at 8%				PV of an Ordinary Annuity of $1 at 8%
  10 years		0.463		10 years		6.710
  11 years		0.429		11 years		7.139
  15 years		0.315		15 years		8.559

  Sung Corporation Capital Asset and Depreciation Schedule For Fiscal Years Ended September 30, 2020, and September 30, 2021
  Assets		Acquisition Date		Cost		Residual Value		Depreciation Method		Estimated Life in Years		Depreciation Expense, Year Ended September 30
  												2020		2021
  Land A		Oct. 1, 2019		$ (1)		N/A		N/A		N/A		N/A		N/A
  Building A		Oct. 1, 2019		(2)		$40,000		Straight-line		(3)		$17,450		(4)
  Land B		Oct. 2, 2019		(5)		N/A		N/A		N/A		N/A		N/A
  Building B		Under construction		$320,000 to date		—		Straight-line		30		—		(6)
  Donated Equipment		Oct. 2, 2019		(7)		3,000		150% declining- balance		10		(8)		(9)
  Machine A		Oct. 2, 2019		(10)		6,000		Double-declining- balance		8		(11)		(12)
  Machine B		Oct. 1, 2020		(13)		—		Straight-line		20		—		(14)
  N/A = Not applicable

Instructions

a. For each numbered item in the schedule, give the correct amount. Round each answer to the nearest dollar.

b.  When would it be appropriate for management to use different depreciation policies as they have done for Machines A and B?

You work for a large accounting firm KMPG as a Senior Accountant. Your client Bear plc acquired shares in Wolf plc several years back and you are responsible for the preparation of the year end work.

The following are the Statements of financial position for Bear plc and Wolf plc as at 31 March 2020, together with the additional information provided below.

Notes to the above financial statements:

1. Wolf Plc acquired 84,000 ordinary shares in Wolf on 31 March 2017. They also acquired 15% of the preference shares.

2. At the date of acquisition, the retained earnings of Wolf plc were £205,000.

3. During the year, Bear sold goods to Wolf for £10,400 which included a mark-up on cost of 30%. At the end of the year, 50% of this stock was still held by Wolf plc.

4. At the date of acquisition, the land and buildings of Wolf plc had a fair value of £50,000 more than their book value. This fair value increase has not been incorporated into the statement of financial position for Wolf plc. Land accounts for 20% of this amount. Wolf acquired the building on 1 April 2012. The group policy is to depreciate buildings over a period of 50 years.

4. Wolf spent £42,000 on developing a new and innovative product. Wolf’s policy is to expense development costs, however, it is Bear’s policy to capitalise development costs (i.e. treat it as an asset). The following provides a breakdown of expenditure by Wolf:

Development costs up to 31 March 2017     £32,000

Development costs after 31 March 2017     £10,000

6. On the 31March 2020, an impairment test was carried out on the goodwill arising from the acquisition of Wolf plc. The report indicated that the goodwill needs to be written down by £10,000.

7. Wolf declared a dividend to its ordinary shareholders on 15 March 2020 which remained unpaid by 31 March 2020. Bear has not accounted for this income in their financial statements.

1. Prepare the consolidation schedule for Wolf plc at 31 March 2020.

2. Calculate the equity and non-controlling interest that will appear in the consolidated statement of financial position for the Bear Group plc at 31 March 2020.

c. Prepare a memorandum for the attention of the financial director of Bear Plc explaining why consolidated accounts are necessary and what are the criteria regarding exemption and exclusion from preparing consolidated accounts.

d. Prepare a memorandum for the financial director of Bear plc explaining the limitations of group accounts.

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are

$ 4.93$4.93

million. The product is expected to generate profits of

$ 1.17$1.17

million per year for ten years. The company will have to provide product support expected to cost

$ 94 comma 000$94,000

per year in perpetuity. Assume all profits and expenses occur at the end of the year.a. What is the NPV of this investment if the cost of capital is

6.4 %6.4%​?

Should the firm undertake the​ project? Repeat the analysis for discount rates of

1.1 %1.1%

and

17.3 %17.3%​,

respectively.

b. What is the IRR of this investment​ opportunity?  

c. What does the IRR rule indicate about this​ investment?

a. What is the NPV of this investment if the cost of capital is

6.4 %6.4%​?

Should the firm undertake the​ project? Repeat the analysis for discount rates of

1.1 %1.1%

and

17.3 %17.3%​,

respectively.If the cost of capital is

6.4 %6.4%​,

the NPV will be

​$nothing.

​(Round to the nearest​ dollar.)

Please paraphrase the following in your own words.

Technological Innovation

Next to improving methods of fossil fuel production to reduce climate impact, and biofuels, an important area of investment to be mentioned are new offshore wind parks (solar energy has been abandoned as a major R&D area in 2008). An offshore wind farm (108 MWh) has been developed with energy provider Nuon, 10 km west of the Dutch coast at Egmond aan Zee (5). Shells offshore technical knowledge with oil and gas platforms helped ensure 115 tonne turbines to withstand the harshest weather.

New ways of Stakeholder Engagement

Shell has started to develop close relationships with its external stakeholders. Contacts are maintained with the academic world, governmental bodies and NGO’s. The relationships provide two-way information (informing NGOs about latest Shell news and funnelling information of NGO into the Shell organisation). Shell is performing impact assessments and setting up engagementswith NGO’s and local communities to investigate impact of new upstream projects, in order to provide for a sustainable cooperation with local communities. An example is the project in the Arctic region. In cooperation with IUCN and Wetlands International, Shell is studying implications of construction of new upstream projects on tundra and permafrost environments. Traditional knowledge of Eskimos about ice seasons, whale and seal movements is therefore crucial. It helps Shell to plan better its offshore production, not to disturb traditional fishing and hunting.

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are 4.95 million. The product is expected to generate profits of 1.05 million per year for ten years. The company will have to provide product support expected to cost 91,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is ​5.6%? Should the firm undertake the​ project? Repeat the analysis for discount rates of 1.5% and 13.8%​, respectively. b. What is the IRR of this investment​ opportunity?   c. What does the IRR rule indicate about this​ investment?

Subject : INNOVATION MANAGEMENT FOR GLOBAL

Assignment

You work as a consultant. Your current assignment is to advise a large, traditional manufacturing firm whose products are facing obsolescence. Your initial audit of the company highlights a failure to innovate over many years.

Briefly outline the reasons why large organisations often struggle to innovate. You have been asked to prepare a presentation to the manufacturing company’s senior management suggesting ways in which the company could become more innovative. Provide a report which explains the points that you would cover in your presentation. Your report should be in continuous prose, using a report format.

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.94 million. The product is expected to generate profits of $ 1.18 million per year for ten years. The company will have to provide product support expected to cost $ 96000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.

a. What is the NPV of this investment if the cost of capital is 6.2 %​? Should the firm undertake the​ project? Repeat the analysis for discount rates of 1.1 % and 17.5 %​, respectively.

b. What is the IRR of this investment​ opportunity?  

c. What does the IRR rule indicate about this​ investment?

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.91 million. The product is expected to generate profits of $ 1.15 million per year for ten years. The company will have to provide product support expected to cost $ 96,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.

a. What is the NPV of this investment if the cost of capital is 6.5 %​? Should the firm undertake the​ project? Repeat the analysis for discount rates of 1.2 % and 16.8 %​, respectively.

b. What is the IRR of this investment​ opportunity?  

c. What does the IRR rule indicate about this​ investment?