Grichuk Power leased high-tech electronic equipment from Kolten Leasing on January 1, 2018. Kolten purchased the equipment from Wong Machines at a cost of $250,000, its fair value. (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.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly lease payments $15,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. Economic life of asset 5 years Interest rate charged by the lessor 8% Required: Prepare a lease amortization schedule and appropriate entries for Grichuk Power from the commencement of the lease through December 31, 2018. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter.

Amort Schedule

General Journal

Prepare a lease amortization schedule for the term of the lease for Grichuk Power from the commencement of the lease through December 31, 2018. December 31 is the fiscal year end for each company. (Round your intermediate calculations to the nearest whole dollar amount. Enter all amounts as positive values.)

journal entries:

1 )Record the beginning of the lease for Grichuk Power.

2)Record the quarterly rental paid by Grichuk Power.

3)Record the quarterly rental and interest paid by Grichuk Power.

4 ) Record the amortization of Right-of-use equipment for Grichuk Power.

The TMI Corporation has been in operation for over 30 years and, at December 31, 2017, it had:

• 10,000 shares of $300 par-value common stock authorized, of which 4,000 shares had been issued, and

• 10,000 shares authorized, issued, and outstanding of $20 stated-value preferred stock, that pays a dividend of 4%.

On January 2, 2018, TMI’s Board of Directors declared and issued a 3-for-1 common stock split. Then, on September 1, 2018, TMI’s Board declared (i) a 20% (small) common stock dividend to holders of record on October 1, to be distributed on November 1, and (ii) the preferred stock dividend.

The company’s accounts also showed the following balances on August 31, 2018, before the declaration of the dividends: Additional contributed capital . . . . . . . . . . . . . . . . . . . . . . . . $ 90,000

Retained earnings (includes all net income earned through August 31) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000

When distributed in November, the stock dividend included 6,000 fractional share rights, representing 600 potential shares. On December 15, 90% of the rights were exercised; the remaining rights will not be exercised until 2019.

On December 20, 2018, TMI acquired 2,000 shares of its own common stock at the current market value.

On December 30, 2018, TMI established a $206,000 sinking fund, with an equivalent reserve in stockholders’ equity.

The company had additional net income of $114,000 for the period September 1 through December 31, 2018.

After the stock split, the market value of TMI’s common stock throughout 2018 was $96 per share. Using the information above, prepare a statement of stockholders’ equity of The TMI Corporation at December 31, 2018, providing full disclosure.

In order to provide the necessary disclosures in the statement of stockholders’ equity, it will be necessary to consider the information relating to the stock split and the stock dividend. However, do not provide any supporting journal entries for those transactions.

On January 1, 2018, Rick’s Pawn Shop leased a truck from Chumley Motors for a five-year period with an option to extend the lease for three years. Rick’s had no significant economic incentive as of the beginning of the lease to exercise the 3-year extension option. Annual lease payments are $15,500 due on December 31 of each year, calculated by the lessor using a 5% interest rate. The agreement is considered an operating lease. (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 Rick’s journal entry to record for the right-of-use asset and lease liability at January 1, 2018.
2. Prepare the journal entries to record interest and amortization at December 31, 2018.

• Required 1
• Required 2

Prepare Rick’s journal entry to record for the right-of-use asset and lease liability at January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

Journal entry worksheet

• Record the beginning of the lease for Rick's.

Note: Enter debits before credits.

• Required 2

Prepare the journal entries to record interest and amortization at December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

Journal entry worksheet

• Record the lease and interest payment for Rick's.

Note: Enter debits before credits.

• Record the amortization of right-to-use asset for Rick's.

Note: Enter debits before credits.

Problem 21-5 Statement of cash flows; direct method [LO21-3, 21-8]

Comparative balance sheets for 2018 and 2017 and a statement of income for 2018 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

Additional information from the accounting records:

1. Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018.
2. During 2018, equipment with a cost of $600,000 (90% depreciated) was sold.
3. The statement of shareholders' equity reveals reductions of $225,000 and $370,000 for stock dividends and cash dividends, respectively.

Required:
Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2018. Present cash flows from operating activities by the direct method. (Enter your answers in thousands (i.e., 5,000 should be entered as 5). Amounts to be deducted should be indicated with a minus sign.)

Revenue Recognition for ABC Software Company under ASC 606

ABC COMPANY was stumped by U.S. accounting rules for revenue recognition and gave up trying to comply with them.  The Japanese giant recognized this would lead to the delisting of its ADR shares on NASDAQ.  ABC also said it would be able to file its 2006 annual report under U.S. GAAP and it couldn’t vouch for its financial statements since 2000.  ABC COMPANY said a restatement was not practicable because of the complexities.  ABC noted that its financial statements under Japanese GAAP are current and not affected by this announcement.  

Under accounting principles generally accepted in the United States of America, revenue recognition rules are complicated for software companies whose contracts combine the sale of software with maintenance service agreements.  Previously, a standard called SOP 97-2 for companies wishing to recognize the software-sales revenue up front must perform an analysis of such contracts that provides “vendor specific objective evidence” (VSOP) of consistent treatment of sales and service.  That analysis, which ABC COMPANY says it has been unable to complete, required before portions of revenue from a single contract can be broken out and recognized at different times.  ABC says it is unable to complete the VSOE analysis for its auditor in time to file the annual report for the year ending March 31, 2006 even though ABC had previously been warned by NASDAQ and received an extension.  

On June 17, 2008 the Securities and Exchange Commission instituted proceedings against ABC pursuant to the Securities and Exchange Act of 1934.  The resulting order revoked the U.S. registration of each class of ABC’s registered securities and ordered ABC to cease and desist from committing certain violations based on ABC’s failure to file annual reports and maintain sufficient internal controls, and failure to make and keep accurate books and records.  Following the revocation order ABC securities remain listed for trading, and actively trade, in Japan.  ABC's American Depositary Receipt Program was subsequently terminated as of March 31, 2010.  

Recently, new revenue recognition standards have been adopted in the USA.  ABC’s management would like your advice on whether it might be a good time to apply for the company to be listed on a US stock exchange by complying with revenue recognition requirements.

ABC has the following sources of income that should be evaluated.

1. Licensing of product.  Customers pay an upfront fee of $12,000 for 12 months to use ABC’s software.  Customers can access ABC’s software at any time during the period.  The contract term starts on July 1 and go through June 30.  ABC provides hosting and maintenance of the site.
2. Implementation . ABC software will provide training, project management, data conversion and process consulting to onboard new clients. Implementation services typically require full-time work for 3-months on average with a team of 3 providing hourly billing at a rate of $150 per hour.
3. Hardware sales.  ABC is a reseller of key components.  ABC has no inventory obligations and drop ships produce from the manufacturer’s distribution site.  The mark-up on hardware sales is 10% for ABC.

Other considerations:

Does the customer have the ability to forgo the hosting provided by the Company and instead host it on their own servers, or some other remote server (e.g., AWS, Microsoft Azure)
Yes, this is an option we make available, though we highly discourage it. Out of 2000+ customers, less than two dozen forgo the hosting services.

·         How integral are the implementation services to using the software?
Highly integral. We provide no generic services. For example, as part of implementation, we provide an overview of the ABC database, but we do not educate customers on relational database management systems.

·         Could the customer source the implementation services from some other third party?
A customer has only one option for sourcing implementation services: 1) Company ABC if the system was purchased through direct sales, or 2) a channel partner if the system was purchased through that channel partner.

·         Does ABC perform regular upgrades to the software?
Yes

·         Does the customer have to pay separately to get access to such upgrades?
No, upgrades are included as part of the annual license subscription.

·         If ABC provides upgrades, are they promised (explicitly or implicitly) at any sort of regular cadence?
Releases (i.e., upgrades) are delivered every four weeks like clockwork.

·         Is there a minimum number of upgrades promised or implied during the term of the contract?
License subscriptions run on an annual basis, though contracts are often times multiple-year subscriptions. Thirteen releases per year are implied in an annual subscription.

Explain the following

1.       A.  Would the license meet the definition of a performance obligation?

B. Would the license be classified as a license of functional intellectual property or symbolic intellectual property?

C. Would the revenue be recognized at the point in time that access to the license is granted to the customer or over the license term?

2.          Discuss the revenue recognition for Implementation

3.          Discuss revenue recognition for Hardware sales.

4.          Discuss a factor that could change one of your answers.

Distribution, Metabolism, Drug Interactions, and the Effects of Aging, Obesity, and Disease

Problem #4

Please describe 3 different processes through which a drug can exert pharmacokinetic non-linearity and give an example of a drug (different drug for each type) that exerts this type of non-linearity for each example (e.g., saturablemetabolism and phenytoin)

Absorption-related non-linearity – mechanism and example of a drug

Distribution-related non-linearity – mechanism and example of a drug

Metabolism-related non-linearity – mechanism and example of a drug

Problem #5

Please describe the influence of extremes of age, obesity, and a disease state of your choice on the following processes and give an example of a drug that may be affected by each. If none – state “no effect.”

5a. Influence of extremes of age (neonate vs. elderly)

Absorption –

Example of drug:

Distribution –

Example of drug:

Metabolism –

Example of drug:

Excretion –

Example of drug:

5b. Influence of obesity

Absorption –

Example of drug:

Distribution –

Example of drug:

Metabolism –

Example of drug:

Excretion –

Example of drug:

5c. Disease state of your choice (write in disease state) _________________________

Absorption –

Example of drug:

Distribution –

Example of drug:

Metabolism –

Example of drug:

Excretion –

Example of drug:

Problem #6

Explain the influence of aging on each of the following:

Drug metabolism through CYP3A4 (consider both gut and liver)

Glucuronidation

Sulfation

Acetylation

Mercia Chocolates produces gourmet chocolate products with no preservatives. Any production must be sold within a few days, so producing for inventory is not an option. Mercia’s single plant has the capacity to make 97,000 packages of chocolate annually. Currently, Mercia sells to only two customers: Vern’s Chocolates (a specialty candy store chain) and Mega Stores (a chain of department stores). Vern’s orders 60,400 packages and Mega Stores orders 22,000 packages annually. Variable manufacturing costs are $24 per package, and annual fixed manufacturing costs are $627,000.

The gourmet chocolate business has two seasons, holidays and non-holidays. The holiday season lasts exactly four months and the non-holiday season lasts eight months. Vern’s orders the same amount each month, so Vern’s orders 19,200 packages during the holidays and 41,200 packages in the non-holiday season. Mega Stores only carries Mercia’s chocolates during the holidays.

Required:

a. Calculate the product cost for each season with excess capacity costs assigned to season in which it is incurred.

b. Calculate the product cost for each season with excess capacity costs assigned to the season requiring it.

Require A

Product cost

Non-holiday ??? per package

Holiday ??? per package

Require B

Product cost

Non-holiday ???? per package

Holiday ????   per package

. In the retail trade industry, unionized workers earn 19.0% more than non-unionized workers do. As you learned in class, this does not necessarily mean that non-union workers who gained union membership would receive raises of (on average) 19%, nor does it mean that the existence of the union increased the wages of workers who were able to join the union by 19%.

a. As we noted in class, many unions prefer to grant union membership to workers with a significant amount of work experience in the industry. In light of that fact alone, is the 19% difference between union and non-union wages an overestimate or an underestimate of the value of belonging to a labor union? (Other factors might also affect that comparison, but ignore them for this part of the question.)

b. Define the “spillover” and “threat” effects. If the spillover effect were larger in magnitude than the threat effect, would the existence of unions raise or lower the earnings of non-union workers? Would the 19% difference between union and non-union wages overestimate or underestimate the value of belonging to a labor union? (Again, ignore other factors for this part.)

c. Briefly explain how the “product market” effect may operate in this industry. If the product market effect were large, would that suggest that the 19% wage difference is an underestimate or an overestimate of the amount by which unions increase workers’ wages? (Ignore other factors again here.)

Financial information for Powell Panther Corporation is shown below:

Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest dollar, if necessary. Negative values, if any, should be indicated by a minus sign.

1. What was net operating working capital for 2018 and 2019? Assume the firm has no excess cash.

   2018:  $  

   2019:  $  

2. What was the 2019 free cash flow?

   $  

3. How would you explain the large increase in 2019 dividends?

   1. The large increase in net income from 2018 to 2019 explains the large increase in 2019 dividends.
   2. The large increase in free cash flow from 2018 to 2019 explains the large increase in 2019 dividends.
   3. The large increase in EBIT from 2018 to 2019 explains the large increase in 2019 dividends.
   4. The large increase in sales from 2018 to 2019 explains the large increase in 2019 dividends.
   5. The large increase in retained earnings from 2018 to 2019 explains the large increase in 2019 dividends.

   -Select-