Question # 6 Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments are calculated using 10%. Title passes to Erica at the end of the lease. Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation. The equipment’s expected useful life of eight years, with no residual value. Instructions (Round values to the nearest dollar.) a. What type of lease is this for the lessee? What is your rationale? a. Prepare a lease amortization table for 2020 and 2021. b. Prepare the general journal entries relating to this lease for 2020.
In: Accounting
Erica Corp., who reports under ASPE, leases machinery on January 1, 2020, and records this as a capital lease. Seven annual lease payments of $ 140,000 are required the end of each year, starting December 31, 2020. The present value of the lease payments are calculated using 10%. Title passes to Erica at the end of the lease.
Erica uses the effective interest method of amortization for the lease. The company uses straight-line depreciation. The equipment’s expected useful life of eight years, with no residual value.
Instructions (Round values to the nearest dollar.)
In: Accounting
The DeVille Company reported pretax accounting income on its
income statement as follows:
| 2018 | $ | 440,000 | |
| 2019 | 360,000 | ||
| 2020 | 430,000 | ||
| 2021 | 470,000 | ||
Included in the income of 2018 was an installment sale of property
in the amount of $66,000. However, for tax purposes, DeVille
reported the income in the year cash was collected. Cash collected
on the installment sale was $26,400 in 2019, $33,000 in 2020, and
$6,600 in 2021.
Included in the 2020 income was $28,000 interest from investments
in municipal bonds.
The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new
tax legislation was passed reducing the tax rate to 25% for the
years 2020 and beyond.
Required:
Prepare the year-end journal entries to record income taxes for the
years 2018–2021.
In: Accounting
The DeVille Company reported pretax accounting income on its
income statement as follows:
| 2018 | $ | 360,000 | |
| 2019 | 280,000 | ||
| 2020 | 350,000 | ||
| 2021 | 390,000 | ||
Included in the income of 2018 was an installment sale of property
in the amount of $32,000. However, for tax purposes, DeVille
reported the income in the year cash was collected. Cash collected
on the installment sale was $12,800 in 2019, $16,000 in 2020, and
$3,200 in 2021.
Included in the 2020 income was $11,000 interest from investments
in municipal bonds.
The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new
tax legislation was passed reducing the tax rate to 25% for the
years 2020 and beyond.
Required:
Prepare the year-end journal entries to record income taxes for the
years 2018–2021.
In: Accounting
The DeVille Company reported pretax accounting income on its
income statement as follows:
| 2018 | $ | 390,000 | |
| 2019 | 310,000 | ||
| 2020 | 380,000 | ||
| 2021 | 420,000 | ||
Included in the income of 2018 was an installment sale of property
in the amount of $44,000. However, for tax purposes, DeVille
reported the income in the year cash was collected. Cash collected
on the installment sale was $17,600 in 2019, $22,000 in 2020, and
$4,400 in 2021.
Included in the 2020 income was $18,000 interest from investments
in municipal bonds.
The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new
tax legislation was passed reducing the tax rate to 25% for the
years 2020 and beyond.
Required:
Prepare the year-end journal entries to record income taxes for the
years 2018–2021.
In: Accounting
Pina Company provides the following information about its defined benefit pension plan for the year 2020.
| Service cost | $90,900 | ||
| Contribution to the plan | 103,000 | ||
| Prior service cost amortization | 9,300 | ||
| Actual and expected return on plan assets | 63,200 | ||
| Benefits paid | 39,800 | ||
| Plan assets at January 1, 2020 | 648,600 | ||
| Projected benefit obligation at January 1, 2020 | 706,600 | ||
| Accumulated OCI (PSC) at January 1, 2020 | 148,800 | ||
| Interest/discount (settlement) rate | 10 | % |
Prepare the journal entry recording pension expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
In: Accounting
Ivanhoe Company had $177,900 of net income in 2019 when the selling price per unit was $154, the variable costs per unit were $98, and the fixed costs were $572,500. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Ivanhoe Company is under pressure from stockholders to increase net income by $93,800 in 2020.
Compute the number of units sold in 2019.
Compute the number of units that would have to be sold in 2020 to reach the stockholders’ desired profit level.
Assume that Ivanhoe Company sells the same number of units in 2020 as it did in 2019. What would the selling price have to be in order to reach the stockholders’ desired profit level?
In: Accounting
On October 15, 2016, Koala, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $60. [We are assuming that the 2020 coupon has just been redeemed.]
1. What was the nominal yield on this bond on October 15, 2016? [To 1 decimal place.]
2. What was the current yield on this bond on October 15, 2016? [To 2 decimal places.]
3. What was the yield to maturity for this bond on October 15, 2016? [To 3 decimal places.]
4. What was the risk premium for this bond on October 15, 2016? [To 3 decimal places.]
5. What was the nominal yield on this bond on October 15, 2020? [To 1 decimal place.]
6. What was the current yield on this bond on October 15, 2020? [To 2 decimal place.]
7. What was the yield to maturity for this bond on October 15, 2020? [To 3 decimal places.]
8. What was the risk premium for this bond on October 15, 2020? [To 3 decimal places.]
9. It is now October 15, 2020 and suddenly the Federal Reserve announces a massive program to reduce inflation. Instantly, the market rate of interest for a riskless corporate bond that would apply to this bond, falls from 4.0% to 2.5%. If there is no change in the risk premium expected for this Koala, Inc. bond, what will be this bond’s yield to maturity? [To 3 decimal places.]
In: Finance
Following are selected balance sheet accounts of Windsor Bros.
Corp. at December 31, 2020 and 2019, and the increases or decreases
in each account from 2019 to 2020. Also presented is selected
income statement information for the year ended December 31, 2020,
and additional information.
| Selected balance sheet accounts | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets |
2020 |
2019 |
Increase |
||||||
|
Accounts receivable |
$34,100 | $23,900 | $10,200 | ||||||
|
Property, plant, and equipment |
276,600 | 247,300 | 29,300 | ||||||
|
Accumulated depreciation—plant assets |
(179,700 | ) | (165,400 | ) | (14,300 | ) | |||
| Liabilities and stockholders’ equity |
2020 |
2019 |
Increase |
||||||
|
Bonds payable |
$ 48,800 | $46,200 | $2,600 | ||||||
|
Dividends payable |
7,900 | 4,900 | 3,000 | ||||||
|
Common stock, $1 par |
21,800 | 19,000 | 2,800 | ||||||
|
Additional paid-in capital |
8,900 | 2,900 | 6,000 | ||||||
|
Retained earnings |
103,500 | 90,400 | 13,100 | ||||||
| Selected income statement information for the year ended December 31, 2020: | |||||||||
|
Sales revenue |
$156,600 | ||||||||
|
Depreciation |
38,300 | ||||||||
|
Gain on sale of equipment |
14,700 | ||||||||
|
Net income |
31,000 | ||||||||
Additional information:
| 1. | During 2020, equipment costing $44,500 was sold for cash. | |
| 2. | Accounts receivable relate to sales of merchandise. | |
| 3. | During 2020, $20,100 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. |
Determine the category (operating, investing, or financing) and the
amount that should be reported in the statement of cash flows for
the following items.
|
Activity |
||||||
|---|---|---|---|---|---|---|
| (a) |
Payments for purchase of property, plant, and equipment. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (b) |
Proceeds from the sale of equipment. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (c) |
Cash dividends paid. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (d) |
Redemption of bonds payable. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
In: Accounting
Following are selected balance sheet accounts of Pharoah Bros. Corp. at December 31, 2020 and 2019, and the increases or decreases in each account from 2019 to 2020. Also presented is selected income statement information for the year ended December 31, 2020, and additional information.
| Selected balance sheet accounts | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets |
2020 |
2019 |
Increase |
||||||
|
Accounts receivable |
$34,100 | $23,900 | $10,200 | ||||||
|
Property, plant, and equipment |
277,700 | 247,800 | 29,900 | ||||||
|
Accumulated depreciation—plant assets |
(176,500 | ) | (168,200 | ) | (8,300 | ) | |||
| Liabilities and stockholders’ equity |
2020 |
2019 |
Increase |
||||||
|
Bonds payable |
$ 49,300 | $46,500 | $2,800 | ||||||
|
Dividends payable |
7,900 | 4,900 | 3,000 | ||||||
|
Common stock, $1 par |
22,200 | 19,200 | 3,000 | ||||||
|
Additional paid-in capital |
9,100 | 3,000 | 6,100 | ||||||
|
Retained earnings |
103,800 | 90,500 | 13,300 | ||||||
| Selected income statement information for the year ended December 31, 2020: | |||||||||
|
Sales revenue |
$156,300 | ||||||||
|
Depreciation |
37,700 | ||||||||
|
Gain on sale of equipment |
14,700 | ||||||||
|
Net income |
31,000 | ||||||||
Additional information:
| 1. | During 2020, equipment costing $45,000 was sold for cash. | |
| 2. | Accounts receivable relate to sales of merchandise. | |
| 3. | During 2020, $20,200 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. |
Determine the category (operating, investing, or financing) and the
amount that should be reported in the statement of cash flows for
the following items.
|
Activity |
||||||
|---|---|---|---|---|---|---|
| (a) |
Payments for purchase of property, plant, and equipment. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
|||
| (b) |
Proceeds from the sale of equipment. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
|||
| (c) |
Cash dividends paid. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
|||
| (d) |
Redemption of bonds payable. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
In: Accounting