ABC Energy Corp. (the “Company”), an SEC registrant, operates three manufacturing facilities in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (EAs) of varying useable years (i.e., the years in which the allowance may be used) to be used between 2015 and 2030. Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with the Federal Energy Regulatory Commission (FERC) accounting guidance for EAs. The Company has a fiscal year end of December 31.
As background, in an effort to control or reduce the emission of pollutants and greenhouse gases, governing bodies typically issue rights or EAs to entities to emit a specified level of pollutants. Each individual EA has a useable year designation. EAs with the same useable year designation are fungible and can be used by any party to satisfy pollution control obligations. Entities can choose to buy EAs from, and sell EAs to, other entities. Such transactions are typically initiated through a broker. At the end of a compliance period, participating entities are required to either (1) deliver to the governing bodies EAs sufficient to offset the entity's actual emissions or (2) pay a fine. The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 2024, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 2020–2024.
However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 2024 because of reduced emissions as a result of the upgrade. The Company currently has forecasted the updates to its facilities will cost approximately $15 million. As the Company operates in a capital intensive industry, analysts and investors focus on a number of important ratios and measures, including working capital, capital expenditures, cash flows from operations, and free cash flow. As a result, the board of directors and management provide forward-looking guidance on these ratios and measures and expend great effort managing these results in light of the Company’s operational needs. The Company entered into the following two separate transactions in fiscal year 2020, which will impact the Company’s results as presented in the statement of cash flows, which the Company prepares under the indirect method.
1. To meet its need for additional EAs in fiscal years 2020–2024, on April 2, 2020, the Company spent $6.5 million to purchase EAs with a useable year of 2023 from XYZ Manufacturing Corp.
2. In an effort to offset the costs of the April 2, 2020, purchase of 2023 EAs, the Company sold EAs with a useable year of 2026 to DEF Chemical Corp. for $5 million.
Required:
1. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its purchase of 2023 EAs from XYZ Manufacturing Corp.?
2. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its sale of 2026 EAs to DEF Chemical Corp.?
3. Should these cash flows be reported at gross amounts or net amounts in the 2020 statement of cash flows?
Be sure to cite appropriate authoritative support for your answer from the Accounting Standards Codification.
In: Accounting
ABC Energy Corp. (the “Company”), an SEC registrant, operates three manufacturing facilities in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (EAs) of varying useable years (i.e., the years in which the allowance may be used) to be used between 2015 and 2030. Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with the Federal Energy Regulatory Commission (FERC) accounting guidance for EAs. The Company has a fiscal year end of December 31.
As background, in an effort to control or reduce the emission of pollutants and greenhouse gases, governing bodies typically issue rights or EAs to entities to emit a specified level of pollutants. Each individual EA has a useable year designation. EAs with the same useable year designation are fungible and can be used by any party to satisfy pollution control obligations. Entities can choose to buy EAs from, and sell EAs to, other entities. Such transactions are typically initiated through a broker. At the end of a compliance period, participating entities are required to either (1) deliver to the governing bodies EAs sufficient to offset the entity's actual emissions or (2) pay a fine. The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 2024, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 2020–2024.
However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 2024 because of reduced emissions as a result of the upgrade. The Company currently has forecasted the updates to its facilities will cost approximately $15 million. As the Company operates in a capital intensive industry, analysts and investors focus on a number of important ratios and measures, including working capital, capital expenditures, cash flows from operations, and free cash flow. As a result, the board of directors and management provide forward-looking guidance on these ratios and measures and expend great effort managing these results in light of the Company’s operational needs. The Company entered into the following two separate transactions in fiscal year 2020, which will impact the Company’s results as presented in the statement of cash flows, which the Company prepares under the indirect method.
1. To meet its need for additional EAs in fiscal years 2020–2024, on April 2, 2020, the Company spent $6.5 million to purchase EAs with a useable year of 2023 from XYZ Manufacturing Corp.
2. In an effort to offset the costs of the April 2, 2019, purchase of 2023 EAs, the Company sold EAs with a useable year of 2026 to DEF Chemical Corp. for $5 million.
Required:
1. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its purchase of 2023 EAs from XYZ Manufacturing Corp.?
2. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its sale of 2026 EAs to DEF Chemical Corp.?
3. Should these cash flows be reported at gross amounts or net amounts in the 2020 statement of cash flows?
Be sure to cite appropriate authoritative support for your answer from the Accounting Standards Codification.
In: Accounting
|
The TS Corporation has budgeted sales for the year as follows: Quarter 1 2 3 4 |
What is scheduled production for third quarter?
In: Accounting
Calculate the variance of the following returns.
Year Return
1 0.17
2 0.06
3 0.1
4 0.13
5 0.08
Enter the answer with 4 decimals, e.g. 0.1234.
In: Finance
|
1. Define economies of scale. 2. Define economies of scope. 3. Define economies of sequence. 4. What would you want to know before you commit to a make or buy decision? |
In: Economics
Let X equal the outcome (1, 2 , 3 or 4) when a fair four-sided die is rolled; let Y equal the outcome (1, 2, 3, 4, 5 or 6) when a fair six-sided die is rolled. Let W=X+Y.
a. What is the pdf of W?
b What is E(W)?
In: Statistics and Probability
Let L be the line parametrically by~r(t) = [1 + 2t,4 +t,2 + 3t] and M be the line through the points P= (−5,2,−3) and Q=(1,2,−6).
a) The lines L and M intersect; find the point of intersection.
b) How many planes contain both lines?
c) Give a parametric equation for a plane Π that contains both lines
In: Advanced Math
Assume that you have a fair 6 sided die with values {1, 2, 3, 4, 5, 6} and a fair 12 sided die with values {1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12}. A discrete random variable is generated by rolling the two dice and adding the numerical results together.
(a) Create a probability mass function that captures the probability of all possible values of this random variable. You may use R or draw the pmf on paper.
(b) Find the expected value of this discrete random variable. Make sure to show your work in calculating this.
(c) Find the variance of this discrete random variable. Make sure to show your work in calculating this.
please answer all
In: Statistics and Probability
You roll a die 48 times with the following results.
|
Number |
1 |
2 |
3 |
4 |
5 |
6 |
|
Frequency |
3 |
1 |
15 |
13 |
4 |
12 |
Use a significance level of 0.05 to test the claim that the die is
fair.
(PLEASE SHOW ALL YOUR WORK)
In: Statistics and Probability
Returns on stocks X and Y are listed below:
| Period | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
|---|---|---|---|---|---|---|---|
| Stock X | 3% | -2% | 9% | 6% | -1% | -4% | 11% |
| Stock Y | 1% | -4% | 7% | 12% | 3% | -2% | -1% |
Consider a portfolio of 20% stock X and 80% stock Y.
What is the (population) variance of portfolio returns?
Please round your answer to six decimal places.
Note that the correct answer will be evaluated based on the full-precision result you would obtain using Excel.
In: Finance