On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2018, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $843,368 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2018, will be $119,000. Negotiations led to the lessee guaranteeing a $178,000 residual value. Equal payments under the lease are $219,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Nguyen is aware that Nevels used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2018, to record the lease.

2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2018, related to the lease.

Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $110,000. The chronometers have a fair value of $143,000. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Prepare appropriate entries for Newton Labs to record the arrangement at its commencement, January 1, 2018, and on March 31, 2018.
2. Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2018, and on March 31, 2018.

On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2018, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $843,368 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2018, will be $119,000. Negotiations led to the lessee guaranteeing a $178,000 residual value.

Equal payments under the lease are $219,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Nguyen is aware that Nevels used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1. Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2018, to record the lease.
2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2018, related to the lease.

On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2018, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $843,368 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2018, will be $119,000. Negotiations led to the lessee guaranteeing a $178,000 residual value.

Equal payments under the lease are $219,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Nguyen is aware that Nevels used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1. Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2018, to record the lease.
2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2018, related to the lease.

Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $10 million higher using FIFO.

Retained earnings reported at the end of 2016 and 2017 was $230 million and $250 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $240 million and $262 million, respectively. 2017 net income reported at the end of 2017 was $18 million (LIFO method) but would have been $20 million using FIFO. After changing to FIFO, 2018 net income was $26 million. Dividends of $9 million were paid each year. The tax rate is 40%.
  
Required:
1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle.
2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018?
3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.
  

On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2018, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $843,368 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2018, will be $119,000. Negotiations led to the lessee guaranteeing a $178,000 residual value.

Equal payments under the lease are $219,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Nguyen is aware that Nevels used a 6% interest rate when calculating lease payments. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1. Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2018, to record the lease.
2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2018, related to the lease.

Eagles Inc. had the following statement of financial position at the end of operations for 2017:

Cash 32000 Accounts payable 48000

Accounts receivable 33920 Bonds payable 65600

FV-NI investments 51200 Common shares 160000

Equipment (net) 129600 Retained earnings 37120

Land 64000

310720 310720

During 2018, the following occurred:+ 1. Eagles sold its FV-NI investments portfolio at a gain of $9,600. 2. A parcel of land was purchased for $75,200. 3. An additional $60,800 worth of common shares was issued. 4. Dividends totalling $19,200 were declared and paid to shareholders. 5. Net income for 2018 was $73,600. 6. Depreciation for 2018 was 19,200. 7. At December 31, 2018, Cash was $125,120; Accounts Receivable was $67,200; and Accounts Payable was $64,000.

1. Prepare the statement of financial position as it would appear at December 31, 2018.

2. Prepare a statement of cash flows for the year ended December 31, 2018 using the indirect method. Assume dividends paid are treated as financing activities.

Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $26 million higher using FIFO. Retained earnings reported at the end of 2016 and 2017 was $246 million and $266 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $256 million and $278 million, respectively. 2017 net income reported at the end of 2017 was $34 million (LIFO method) but would have been $36 million using FIFO. After changing to FIFO, 2018 net income was $42 million. Dividends of $8 million were paid each year. The tax rate is 40%. Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. 2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018? 3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.

Problem 3 Eagles Inc. had the following statement of financial position at the end of operations for 2017:

Cash 32000 Accounts payable 48000 Accounts receivable 33920 Bonds payable 65600 FV-NI investments 51200 Common shares 160000 Equipment (net) 129600 Retained earnings 37120 Land 64000 Total 310720 310720

During 2018, the following occurred:

1. Eagles sold its FV-NI investments portfolio at a gain of $9,600.

2. A parcel of land was purchased for $75,200.

3. An additional $60,800 worth of common shares was issued.

4. Dividends totalling $19,200 were declared and paid to shareholders.

5. Net income for 2018 was $73,600.

6. Depreciation for 2018 was 19,200.

7. At December 31, 2018, Cash was $125,120; Accounts Receivable was $67,200; and Accounts Payable was $64,000.

1. Prepare the statement of financial position as it would appear at December 31, 2018.

2Prepare a statement of cash flows for the year ended December 31, 2018 using the indirect method. Assume dividends paid are treated as financing activities

Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $330,000. The chronometers have a fair value of $429,000. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Prepare appropriate entries for Newton Labs to record the arrangement at its commencement, January 1, 2018, and on March 31, 2018.
2. Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2018, and on March 31, 2018.