Herman Corporation reported the following transactions for 2019:

Herman Corporation uses the direct method for preparing the 2019 Statement of Cash Flows.

1. The net cash flow from operating activities is

2. The net cash flow from investing activities is

3. The net cash flow from financing activities is

Equity Method Accounting, Subsequent Years

PL Communications acquired all of the stock of SJ Telecom on January 1, 2019. It is now December 31, 2021, three years later. PL Communications uses the complete equity method to report its investment in SJ Telecom on its own books. Both companies have December 31 year-ends. The following information is available:

• PL Communications paid $400 million to acquire SJ Telecom.

• At the date of acquisition, the book values of all of SJ Telecom’s reported assets and liabilities approximated fair value. Previously unreported limited-lived identifiable intangibles with a fair value of $20 million were recognized. These intangibles had an estimated life of 5 years, straight-line. There have been no impairment losses.

• Total goodwill impairment losses for 2019 and 2020 were $1 million. There is no goodwill impairment for 2021.

• The change in SJ Telecom’s retained earnings from January 1, 2019, to December 31, 2020, was $12 million.

• In 2021, SJ Telecom reported net income of $6,500,000 and declared and paid dividends of $1,500,000.

• SJ Telecom does not report any other comprehensive income.

Required

Enter both answers in millions (using decimal places, if applicable).

a. Calculate equity in net income for 2021, reported on the books of PL Communications.

$_____ million

b. Calculate the December 31, 2021 balance in Investment in SJ Telecom, reported on the books of PL Communications.

$_____ million

George Young Industries (GYI) acquired industrial robots at the beginning of 2018 and added them to the company’s assembly process. During 2021, management became aware that the $2.8 million cost of the equipment was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows:

The tax rate is 25% for all years involved.

Required:
1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting entry for 2021 depreciation.
2. Will GYI account for the change (a) retrospectively or (b) prospectively?

1.American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $4 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton’s implicit interest rate was 10%.

Required:

1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018.

2. Prepare an amortization schedule for the four-year term of the lease.

3. Prepare the appropriate entries related to the lease on December 31, 2018.

4. Prepare the appropriate entries related to the lease on December 31, 2020.

(Note: You may wish to compare your solution to this exercise with that of E 14–18 which deals with a parallel situation in which the packaging machine was acquired with an installment note.)

(iv) On 1 April 2019, GHL entered into a sale and leaseback agreement for its manufacturing plant. The plant was originally acquired by GHL on 31 March 2009 for $8,910,000, at which point the plant had a useful life of 30 years with no residual value. The sale proceeds of plant from the sale and leaseback agreement were $11.25 million, which is higher than the fair value of the plant of $9.0 million. The plant was leased back on a 20-year lease from 1 April 2019 at an annual rental of $1,105,350 to be paid annually in arrears at 31 March 2020. The sale satisfies HKFRS 15 “Revenue from Contracts with Customers”, however, she insisted to account for it as a financing arrangement. The first lease rental is paid and charged to the statement of profit or loss. The sales proceed was treated as a financial liability. The incremental borrowing rate is 15% per annum.

4) what is the requirement of a sale and leaseback transaction from the seller-lessee perspective in accordance with HKFRS 16?

Accounting Changes-Depreciation
Described below are two independent and unrelated situations involving accounting
changes. Each change occurs during 2016 before any adjusting entries or closing entries
were prepared.
a. On December 30, 2012, Rival Industries acquired its office building at a cost of
$1,000,000. It was depreciated on a straight-line basis assuming a useful life of 40
years and no salvage value. However, plans were finalized in 2016 to relocate the
company headquarters at the end of 2020. The vacated office building will have a
salvage value at that time of $700,000.
b. At the beginning of 2013, the Hoffman Group purchased office equipment at a cost of
$330,000. Its useful life was estimated to be 10 years with no salvage value. The
equipment was depreciated by the sum-of-the years’-digits method. On January 1,
2016, the company changed to the straight-line method.
Instructions:
a. Briefly describe the way company should report this accounting change in the
financial statements.
b. Prepare any 2016 journal entry related to the change.

Exercise 14-20 Installment note; amortization schedule [LO14-3]

American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. In payment for the $4.3 million machine, American Food Services issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 9%. (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 journal entry for American Food Services’ purchase of the machine on January 1, 2018.
2. Prepare an amortization schedule for the four-year term of the installment note.
3. Prepare the journal entry for the first installment payment on December 31, 2018.
4. Prepare the journal entry for the third installment payment on December 31, 2020.

Given the following estimated demand equation Answer the following questions

“From the data for 50 States in the United States , the following Regression Equation was estimated:

Ln C =    5.75 – 1.29 LnP + 0.67 LnY - 0.022LnA - 0.03LnExcT
T- Stats:    (0.91) (1.45)       (2.45)   (1.02)             (2.04)          
R2 = 0.87;
T- table value at 95%; and 46 degrees of freedom is 1.96.

Where C = Cigarette consumption packs per year
   P = real price per pack
   Y = Real disposable income per capita
       A= Per capita Advertising expenditure
       Exc = Excise tax per packet
   T-values are all in the parentheses  

a). What is the elasticity of demand for cigarettes with respect to price? Is it statistically significant? Interpret this number in plain English
b) What is the Income Elasticity of Demand for Cigarettes? Is it statistically significant? Interpret this number
c) Some people claim that Advertising has No bearing on consumption of cigarettes. Do you agree/ Why or Why Not?
d) Using your calculator, or EXCEL can you predict the level of Consumption of Cigarettes when the Price per pack is $6.25, Income per capita is $69,600, and Advertising expenditure is 30 million dollars? What is that number?
e) Suppose the State of Wisconsin is proposing to increase 10% increase in its Excise tax on cigarette for collecting more “sin-tax” and to promote healthy life-style. Do you think that measure will change anything? Why? Or Why not?

Given the following estimated demand equation Answer the following questions

“From the data for 50 States in the United States for 2015, the following Regression Equation was estimated:

Ln C =             5.75 – 1.29 LnP + 0.67 LnY - 0.022LnA - 0.03LnExcT

T- Stats:           (0.91) (1.45)       (2.45)           (1.02)          (2.04)                            

R² _{= 0.87;}

_{T- table value at 95%; and 46 degrees of freedom is 1.96.}

Where C = Cigarette consumption packs per year

            P = real price per pack

            Y = Real disposable income per capita

                        A= Per capita Advertising expenditure

                        Exc = Excise tax per packet

            T-values are all in the parentheses      

a). What is the elasticity of demand for cigarettes with respect to price? Is it statistically significant? Interpret this number in plain English

b) What is the Income Elasticity of Demand for Cigarettes? Is it statistically significant? Interpret this number

c) Some people claim that Advertising has No bearing on consumption of cigarettes. Do you agree/ Why or Why Not?

d) Using your calculator, or EXCEL can you predict the level of Consumption of Cigarettes when the Price per pack is $6.25, Income per capita is $69,600, and Advertising expenditure is 30 million dollars? What is that number?

e) Suppose the State of Wisconsin is proposing to increase 10% increase in its Excise tax on cigarette for collecting more “sin-tax” and to promote healthy life-style. Do you think that measure will change anything? Why? Or Why not?

Exercise 1 Use the money market and foreign exchange (FX) diagrams to answer the following questions. This question considers the relationship between the euro and the U.S. dollar ($). The exchange rate is in U.S. dollars per euro, E$/e. Suppose that with financial innovation in theUnited States, real money demand in the United States decreases. On all graphs, label the initial equilibrium point A.

(a) Assume this change in U.S. real money demand is temporary. Using the FX and money market diagrams, illustrate and explain how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. (Due to the temporary nature of the shock, assume that the reversal of real money demand occurs before the price level adjusts in the long run.)

(b) Assume this change in U.S. real money demand is permanent. Using a new diagram, illustrate and explain how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C.

(c) Illustrate and explain how each of the following variables changes over time in response to a permanent reduction in real money demand: nominal money supply M_US, price level P_US, real money supply M_US/P_US, U.S. interest rate i_$, and the exchange rate E$/e.