Chapter 11 Operational Assets: Utilization and Impairment
Jackson Company purchased a new piece of equipment on July 1, 2018 at a cost of $36,000. The equipment has an estimated useful life of 10 years and an estimated residual value of $6,000. During its ten-year useful life, the equipment is expected to produce 500,000 units. The equipment actually produced the following number of units: 2018, 25,000; 2019, 84,000; and 2020, 90,000.
(a) Calculate depreciation expense for 2018, 2019, and 2020 assuming Jackson uses sum-of-the-years’-digits depreciation.
(b) Calculate depreciation expense for 2018, 2019, and 2020 assuming Jackson uses double-declining balance depreciation.
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2018
2019
2020
Costs to
date
$1,500,000
$4,000,000
$6,200,000
Cost to
complete
$4,500,000
$2,200,000
$0
Amounts billed to date
$1,400,000
$5,800,000
$9,000,000
Amounts collected to date
$1,300,000
$4,300,000
$9,000,000
Determine the gross profit to be recognized for
2018 2019 2020
Record all journal entries necessary for 2018 below:
Assume that Stanford uses the completed contract method.
Determine the amount of revenue and expense to be recognized
in:
2018
2019
2020
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Silcon Company issued $500,000 of 6%, 10-year bonds on January 1, 2020 for $431,850 to yield an effective annual rate of 8%. Interest is paid semiannually on January 1 and July 1. Instructions: (a) Prepare the journal entries to record the transactions for 2020 related to this bond issuance assuming the effective interest method of amortization is used. (b) Prepare the journal entries as of January 1, 2021 assuming the interest was paid and then the bond was redeemed at 101.
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Sanders Leasing Company signs an agreement on January
1, 2020, to lease equipment to El Paso Company. The following
information relates to this agreement:
The term of the non-cancelable lease is 5 years with
no renewal option. The equipment has an estimated economic life of
5 years.
The cost of the asset to the lessor is $320,000. The
fair value of the asset at January 1, 2020, is $320,000.
The asset will revert to the lessor at the end of the
lease term, at which time the asset is expected to have a residual
value of $34,000, none of which is guaranteed.
The agreement requires equal annual rental payments,
beginning on January 1, 2020.
Collectibility of the lease payments by Sanders is
probable.
Instructions
(Round all numbers to the nearest dollar.)
(a) Assuming the lessor desires an 8% rate
of return on its investment, calculate the amount of the annual
rental payment required. (Round to the nearest
dollar.)
(b) Prepare an amortization schedule that
is suitable for the lessor for the lease term.
(c) Prepare all of the journal entries for
the lessor for 2020 and 2021 to record the lease agreement, the
receipt of lease payments, and the recognition of revenue.
Assume the lessor’s annual accounting period ends on December 31,
and it does not use reversing entries.
can you please solve this question as soon as possible. Thank
you
In: Accounting
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.)
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Problem 18-09 Concord Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $606,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $891,000. The following data pertain to the construction period. 2020 2021 2022 Costs to date $260,580 $466,620 $618,000 Estimated costs to complete 345,420 139,380 –0– Progress billings to date 272,000 551,000 891,000 Cash collected to date 242,000 501,000 891,000 (a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (If the answer is 0, please enter 0. Do not leave any fields blank.) Gross profit recognized in 2020 $ Gross profit recognized in 2021 $ Gross profit recognized in 2022 $ (b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period. (If the answer is 0, please enter 0. Do not leave any fields blank.) Gross profit recognized in 2020 $ Gross profit recognized in 2021 $ Gross profit recognized in 2022 $ Please show working. Thank you.
In: Accounting
Question 12
A comparative balance sheet for Rocker Company appears below:
| ROCKER COMPANY Comparative Balance Sheet |
|||||||||
| Dec. 31, 2020 | Dec. 31, 2019 | ||||||||
| Assets | |||||||||
| Cash | $34,000 | $11,000 | |||||||
| Accounts receivable | 18,000 | 13,000 | |||||||
| Inventory | 25,000 | 17,000 | |||||||
| Prepaid expenses | 6,000 | 9,000 | |||||||
| Long-term investments | 0 | 17,000 | |||||||
| Equipment | 60,000 | 33,000 | |||||||
| Accumulated depreciation—equipment | (20,000 | ) | (15,000 | ) | |||||
| Total assets | $123,000 | $85,000 | |||||||
| Liabilities and Stockholder's Equity | |||||||||
| Accounts payable | $17,000 | $7,000 | |||||||
| Bonds payable | 36,000 | 45,000 | |||||||
| Common stock | 40,000 | 23,000 | |||||||
| Retained earnings | 30,000 | 10,000 | |||||||
| Total liabilities and stockholders' equity | $123,000 | $85,000 | |||||||
| Additional information: | ||
| 1. | Net income for the year ending December 31, 2020 was $35,000. | |
| 2. | Cash dividends of $15,000 were declared and paid during the year. | |
| 3. | Long-term investments that had a cost of $17,000 were sold for $14,000. | |
| 4. | Sales for 2020 were $120,000. | |
*Prepare a statement of cash flows for the year ended
December 31, 2020, using the indirect method. (Show amounts that
decrease cash flow with either a - sign e.g. -15,000 or in
parenthesis e.g. (15,000).)
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