Terms of warehouse contract with Premier Storage:

-The warehouse lease began on January 1, 2018, with a three-year term. The warehouse has an expected remaining useful life of 20 years. There is no provision in the contract for Chariot to obtain ownership of the warehouse.

-During the lease, Chariot has exclusive control over the entire warehouse building and surrounding property.

-Chariot agreed to lease payments of: $500,000 in 2018, $600,000 in 2019 and $700,000 in 2020. Payments are due on December 31 of each year with the first payment being made on December 31, 2018. Chariot is aware that Premier used a 5% interest rate when calculating the lease payments. Note: while the terms of the lease require uneven payment amounts, Chariot should amortize the right-of-use asset on a straight-line basis (as if all three payments were $600,000); this does not affect the amortization of the lease liability.

-The fair value of the warehouse is approximately $20 million.

For the warehouse lease, provide answers to the following questions:

1. Prepare an amortization schedule for the right-of-use asset and the lease liability.

2. Identify the journal entries Chariot would prepare to record the lease under the new lease accounting standard on:

January 1, 2018

December 31, 2018

December 31, 2019

December 31, 2020

3. Show how the warehouse lease contract would appear on the December 31, 2018 year-end Income Statement, Balance Sheet, and Statement of Cash Flows under the new lease accounting standard.

Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 33,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 33,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows: Date Spot Rate Forward Rate (to March 1, 2018) December 1, 2017 $ 5.10 $ 5.175 December 31, 2017 5.20 5.300 March 1, 2018 5.35 N/A Brandlin's incremental borrowing rate is 18 percent. The present value factor for two months at an annual interest rate of 18 percent (1.5 percent per month) is 0.9707. Brandlin must close its books and prepare financial statements at December 31. a-1. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars. a-2. What is the impact on 2017 net income? a-3. What is the impact on 2018 net income? a-4. What is the impact on net income over the two accounting periods? b-1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars. b-2. What is the impact on 2017 net income? b-3. What is the impact on 2018 net income? b-4. What is the impact on net income over the two accounting periods?

Revenue Recognition: Sparrow Film Productions (SPF) wished to expand its production facilities so it borrowed $10,000,000 from First National Bank early in 2018. As a condition of making this loan, the bank requires that the business maintain a current ratio of at least 2 to 1. Business has been pretty good in 2018, but the cost of the expansion has brought the current ratio down below the target. In fact, on December 15, Jack Sparrow, the owner of SPF estimates that the year-end current ratio will be only 1.90 to 1. (A little short of the bank's requirements.) Jerry quickly looks through the signed contracts and sees an unpcoming project that will be started and completed in February 2019 for $500,000. Jerry is thinking about recording the $500,000 as revenue in 2018 instead of in 2019. If he does this, the current ratio at the end of 2018 will be above the required current ratio of 2 to 1. Required: 1. Assume Jerry decides to include the $500,000 as 2018 revenue. Journalize the transaction on 12/31 assuming the cash will be collected in February of 2019. 2. Explain why it would be unethical for Jerry to record the February revenue in 2018. Identify the accounting principle(s) relevant to this situation and give the reasons for your conclusion. This part should be 3-4 sentences. 3. Cite all references used including url or page number (even if you use the textbook). 4. If you were advising Jerry, what else could Jerry do to improve his current ratio that would be acceptable under ethical standards? (2-3 sentences)

The following relate to an operating lease agreement:

1. The lease term is 3 years, beginning January 1, 2018.
2. The leased asset cost the lessor $850,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets.
3. Annual lease payments at the beginning of each year were $144,500.
4. Incremental costs of negotiating costs of negotiating and consummating the completed lease transaction incurred by the lessor were $3,150.

Required:
Prepare the appropriate entries for the lessor from the beginning of the lease through the end of the lease term. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the cash received. (Jan 1, 2018)

2. Record the payment of initial direct costs. (Jan 1, 2018)

3. Record the cost of the lease. (Dec 31, 2018)

4. Record the depreciation expense. (Dec 31, 2018)

5. Record the rent revenue. (Dec 31, 2018)

6. Record the cash received. (Jan 1, 2019)

7. Record the cost of the lease. (Dec 31, 2019)

8. Record the depreciation expense. (Dec 31, 2019)

9. Record the rent revenue. (Dec 31, 2019)

10. Record the cash received. (Jan 1, 2020)

11. Record the cost of the lease. (Dec 31, 2020)

12. Record the depreciation expense. (Dec 31, 2020)

13. Record the rent revenue. (Dec 31, 2020)

On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,392,300 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $1,700,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $279,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $536,250 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger.

During the two years following the acquisition, Sellinger reported the following net income and dividends:

1. Show Palka’s journal entry to record its January 1, 2018, acquisition of an additional 25 percent ownership of Sellinger Company shares.

2. Prepare a schedule showing Palka’s December 31, 2018, equity method balance for its Investment in Sellinger account.

Show Palka’s journal entry to record its January 1, 2018, acquisition of an additional 25 percent ownership of Sellinger Company shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Prepare a schedule showing Palka’s December 31, 2018, equity method balance for its Investment in Sellinger account. (Amounts to be deducted should be indicated with a minus sign.)

Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 26,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 26,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows:

Date Spot Rate Forward Rate (to March 1, 2018)

December 1, 2017 $ 4.40 $ 4.475

December 31, 2017 4.50 4.600

March 1, 2018 4.65 N/A

Brandlin's incremental borrowing rate is 15 percent. The present value factor for two months at an annual interest rate of 15 percent (1.25 percent per month) is 0.9755. Brandlin must close its books and prepare financial statements at December 31.

a-1. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars.

a-2. What is the impact on 2017 net income?

a-3. What is the impact on 2018 net income?

a-4. What is the impact on net income over the two accounting periods?

b-1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars.

b-2. What is the impact on 2017 net income?

b-3. What is the impact on 2018 net income?

b-4. What is the impact on net income over the two accounting periods?

Calculating Weighted-Average Cost Inventory Values The Brattle Corporation began operations in 2018. Information relating to the company’s purchases of inventory and sales of products for 2018 and 2019 is presented below.

2018

March 1 Purchase 220 units @ $12 per unit

June 1 Sold 120 units @ $25 per unit

September 1 Purchase 100 units @ $15 per unit

November 1 Sold 130 units @ $25 per unit

2019

March 1 Purchase 70 units @ $16 per unit

June 1 Sold 80 units @ $30 per unit

September 1 Purchase 100 units @ $18 per unit

November 1 Sold 90 units @ $35 per unit

Calculate the weighted-average cost of goods sold and ending inventory for 2018 and 2019 assuming use of (a) the periodic method and (b) the perpetual method.

a. Weighted-Average Periodic. Do not round your cost per unit. Do not round until your final answer. Round your answers to the nearest whole number.

2018

Cost of goods sold ___3,234_______

Ending inventory _____906_____

2019

Cost of goods sold ____3,195______

Ending inventory ______945____

b. Weighted-Average Perpetual. Do not round your cost per unit. Do not round until your final answer. Round your answers to the nearest whole number.

2018

Cost of goods sold _____3,195_____

Ending inventory _____945_____

2019

Cost of goods sold __________?

Ending inventory __________?

Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 19,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 19,000 korunas on March 1, 2018. Relevant exchange rates for the koruna on various dates are as follows:

Brandlin's incremental borrowing rate is 9 percent. The present value factor for two months at an annual interest rate of 9 percent (0.75 percent per month) is 0.9852. Brandlin must close its books and prepare financial statements at December 31.

1. a-1. Assuming that Brandlin designates the forward contract as a cash flow hedge of a foreign currency receivable and recognizes any premium or discount using the straight-line method, prepare journal entries for these transactions in U.S. dollars.

2. a-2. What is the impact on 2017 net income?

3. a-3. What is the impact on 2018 net income?

4. a-4. What is the impact on net income over the two accounting periods?

5. b-1. Assuming that Brandlin designates the forward contract as a fair value hedge of a foreign currency receivable, prepare journal entries for these transactions in U.S. dollars.

6. b-2. What is the impact on 2017 net income?

7. b-3. What is the impact on 2018 net income?

8. b-4. What is the impact on net income over the two accounting periods?

Garlington Technologies Inc.'s 2018 financial statements are shown below:

Balance Sheet as of December 31, 2018

Income Statement for December 31, 2018

Suppose that in 2019 sales increase by 20% over 2018 sales and that 2019 dividends will increase to $196,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2018. Use an interest rate of 11%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.

Garlington Technologies Inc.'s 2018 financial statements are shown below:

Balance Sheet as of December 31, 2018

Income Statement for December 31, 2018

Suppose that in 2019 sales increase by 15% over 2018 sales and that 2019 dividends will increase to $134,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2018. Use an interest rate of 14%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.