PART A

Bushman Ltd enters into a contract with Lessor Ltd for the use of a ship for one year. The ship is to be used to transport wood from central Queensland to the port of Brisbane. Lessor does not have substitution rights.

The contract specifies a maximum distance that the ship can be used. Bushman Ltd is responsible for operating the ship from central Queensland to the port of Brisbane and is able to choose the details of the journeys (including speed, route and rest stops) within the parameters of the contract. Bushman Ltd does not have the right to continue using the trip after the specified duration is complete.

REQUIRED:

Identify whether a lease exists for Bushman Ltd in accordance with the provisions of AASB 16

‘Leases’. Provide any necessary explanations to support your answer.

PART B

On 1 July, 2020 Bushman Ltd entered into a four-year lease of a building from Lessor Ltd. The terms of the lease agreement are as follows.

• Four payments of $200,000 are due starting on 30 June 2021 (after interest has accrued).
• Bushman can elect to terminate the lease at any time, but they need to pay 20% of an annual lease payment for administrative purposes upon termination
• The economic life of the building is estimated to be ten years.
• The fair value of the building at the commencement of the lease is $1,000,000.
• At the end of the lease term, Bushman has the option to purchase the building from Lessor Ltd at a price that is 10% lower than the predicted market value of the building at that time.
• The interest rate implicit in the lease is 5 per cent.

Assume that the contract is a lease for the purposes of AASB 16 ‘Leases’.

REQUIRED:

Explain how Lessor Ltd would classify the lease in accordance with the requirements of AASB

116 ‘Leases’. Show all necessary working, explanations and assumptions to support your

answer. Also prepare the necessary journal entries for the first year in the books of Lessor Ltd (i.e. 1 July 2020 to 30 June 2021).

PART C

REQUIRED:

Assume also that the unguaranteed residual value of the building at the end of the lease term is $100,000. Prepare any necessary journal entries in the books of Bushman Ltd for the period 1 July 2020 to 30 June 2023 to record the lease in accordance with the requirements of AASB 16 ‘Leases’. Show all necessary working, explanations and assumptions to support your answer.

The deliverable for this assignment is a written report. You must address the following questions in your analysis. Question 1: What prompted the pricing change in the case of Netflix and the debit card fee in the case of BoA? What explanation did the companies offer their customers? Do additional research as required to answer these questions. Question 2: What explains customers’ reactions to the pricing plan change announced by Netflix and the fee proposal announced by BoA? Include in your discussion what role elasticity may have played. Identify the determinant of elasticity most applicable to the explanation you have provided. Question 3: How do you explain why Netflix and Bank of America reacted differently to essentially similar customer responses? Include in your discussion what role a consideration of elasticity may have played in the company decisions. Do additional reading and research as required. Identify the determinant of elasticity most applicable to the explanation you have provided. Question 4: How long did it take for Netflix to recover lost ground in terms of its subscriber base? Which determinant of elasticity is most applicable to your answer for this question? What did Netflix do to bring about this turnaround? This "compare & contrast" case study is based on two real-world examples of pricing strategy dating back to 2011. The expectation is that you will apply your understanding of elasticity of demand to explain the contrasting final decisions. A reading list is provided for your reference. 1. The Case of Netflix Netflix, the popular online movie rental company, was founded in 1997 by Reed Hastings and Marc Randolph. In 1998, the Netflix.com website was launched; it was the first online DVD rental and sales site. The dominant brick-and-mortar DVD rental company at the time was Blockbuster. In 1999, Netflix debuted its subscription service, allowing subscribers to rent DVDs for monthly subscription fees. Netflix went public on May 23, 2002, listing on NASDAQ with an initial offer price of $15 per share and raising $77.2 million. Between October 2002 and January 2004, the stock price had appreciated by more than 1,500%. The company did a 2-for-1 stock split in February 2004 when the price reached $80 (Caplinger, 2016). At the time of its IPO in 2002, Netflix had about 600,000 subscribers. In 2007, it introduced online streaming, allowing subscribers to instantly watch TV shows and movies on their laptops or computers. Between 2007 and 2011, the number of subscribers in the U.S. grew from 7.48 million to 23.53 million (Dunn, 2017). On July 11, 2011, the stock closed at $41.53 (price adjusted for dividends). The Misstep: On July 12, 2011, Netflix split up its existing one DVD at a time + unlimited streaming plan for $9.99 into 3 separate plans: (1) DVD only starting at $7.99, (2) streaming only for $7.99, and (3) DVD + streaming for $15.98 (Gilbert, 2012). The rate hike caused a loss of subscriber base from 24.8 million subscribers in end-June to 23.8 million subscribers in end-September (Pepitone, 2011). By July 29, the stock price had dropped to $37.99, a drop of 8.5% from July 11. By November 25, it had tumbled to $9.12, a plunge of almost 78% since the day of the announcement (closing prices from NASDAQ). The Final Decision: Despite subscribers and investors voting with their feet, the company defended its decision – albeit apologetically - and implemented the new pricing plans. 2. The Case of Bank of America (BoA) Bank of America was established in 1904 as Bank of America National Trust and Savings Association. The Bank of America (BoA) entity was formed in 1998 as a merger between the erstwhile BankAmerica Corporation and NationsBank. From checking and savings accounts to debit cards, credit cards, loans, and asset management, BoA provides a range of services for both households and businesses. In the words of CEO Brian Moynihan, "Bank of America has been helping connect people to what is most important to them for more than 200 years." (Bank of America website). In 2010, the bank had $916.11 billion in deposits. At 12% of market share, this ranked BoA number one in terms of deposits. It was followed closely by JP Morgan Chase and Wells Fargo, each of which had about 10% market share (Comoreanu, 2017). BoA stock is listed on the NYSE. On April 1, 1998, the stock closed at $38 (price adjusted for dividends). On September 1, 2008, the stock closed at $35. The bank suffered losses during the financial crisis; monthly stock price data reveal a low of $3.95 on February 1, 2009. After recovering to $17.83 by March 1, 2010, the stock price started declining again. The downtrend continued in 2011, with a drop of almost 19 per cent between March 1 and June 1 (from $13.93 to $11.24), and another 29 per cent to $7.91 by September 1, 2011. The Misstep: On September 29, 2011, Bank of America announced that, beginning in early 2012, it would start charging its customers $5 a month for using their debit cards (Rauch, 2011). The announcement was met with angry outrage by customers on social media. Reflecting the negative sentiment, stock price declined 7 per cent in the week following the announcement, from $6.35 on September 29 to $5.90 on October 6. It had recovered about 8 per cent to $6.83 on October 31, 2011; it may be noted that this price was still almost 14 per cent lower compared to the price on September 1. The Final Decision: Following the tremendous backlash from its card holders, BoA abandoned its plans. On November 1, 2011, it announced that it would not implement the debit card usage fee (Bernard, 2011).

Describe using words and graphs the how the impact of fiscal policy on output is different in a closed economy IS-LM model and an open economy IS-LM model. In addition, explain carefully how the open economy macro model depends on whether exchange rates are fixed or flexible.

Describe using words and graphs the how the impact of fiscal policy on output is different in a closed economy IS-LM model and an open economy IS-LM model. In addition, explain carefully how the open economy macro model depends on whether exchange rates are fixed or flexible.

Chemical modifications of histone tails are often made in chromatin to change the amount of chromatin compaction. Name three chemical modifications that have been observed by scientists to be on histone tails in chromatin. the modifications that you listed and discuss whether that modification is associated with closed or open chromatin.

A mixture of 0.750 atm ClF3 , 0.554 atm F2 , and 0.394 atm ClF is heated in a closed vessel to 700 K .

ClF3(g)↽−−⇀ClF(g)+F2(g)Kp=0.140 at 700 K

Calculate the equilibrium pressure of each gas at 700 K .

The comparative balance sheets of Coronado Inc. at the beginning and the end of the year 2020 are as follows.

Net income of $47,200 was reported, and dividends of $27,680 were paid in 2020. New equipment was purchased and none was sold.

Prepare a statement of cash flows for the year 2020. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Louise works in a foreign branch of her employer's business. She earned $5,000 per month throughout the relevant period. Which of the following is correct?

a.If Louise worked in the foreign branch from May 1, 2019 until October 31, 2020, she may exclude $40,000 from gross income in 2019 and exclude $50,000 in 2020.

b.If Louise began work in the foreign country on May 1, 2019, she must work through November 30, 2020 in order to exclude $55,000 from gross income in 2020 but none in 2019.

c.If Louise worked in the foreign branch from May 1, 2019 until October 31, 2020, she cannot exclude anything from gross income because she was not present in the country for 330 days in either year.

d.Louise will not be allowed to exclude any foreign earned income because she made less than $107,600.

Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000 and has an estimated useful life of 8 years with a residual value of $10,000.

The delivery van cost $125,000 and has an estimated life of 5 years or 200,000 kilometres and a residual value of $20,000. The delivery truck is expected to be driven 25,000 and 50,000 kilometres in 2019 and 2020, respectively.

Required

1. Ivan has decided to depreciate the equipment using either the straight-line method or double declining method. Calculate depreciation for the equipment for 2020 and 2021 using the straight-line method AND the double declining method.
2. Ivan has decided to depreciate the delivery van using the units-of-production method. Calculate depreciation for the delivery truck for 2020 and 2021.

On 30 June 2017 You Can Cook Pty Ltd purchased equipment at a cost of $625,000 (GST exclusive) with an estimated useful life of 10 years and no residual value. On 30 June 2020, the equipment had a carrying amount of $437 500.

On 30 June 2020 the same item of equipment was determined as having a recoverable amount of $350 000 and a remaining useful life of 7 years.

On 30 June 2023, the equipment was assessed as having a recoverable amount of $260 000 and a remaining useful life of 3 years.

All equipment is carried under the cost model.

Prepare the general journal entries to record the impairment of equipment and depreciation

under the cost model on 30 June 2020, 30 June 2023 and 30 June 2024.

Please note the depreciation expense for the equipment has not been recorded for the year 2020 (ended 30 June 2020).

Narrations are not required