Blossom Incorporated leases a piece of machinery to Pina Company
on January 1, 2020, under the following terms.
| 1. | The lease is to be for 4 years with rental payments of $15,557 to be made at the beginning of each year. | |
| 2. | The machinery’ has a fair value of $81,480, a book value of $60,800, and an economic life of 10 years. | |
| 3. | At the end of the lease term, both parties expect the machinery to have a residual value of $30,400. To protect against a large loss, Blossom requests Pina to guarantee $21,550 of the residual value, which Irving agrees to do. | |
| 4. | The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. | |
| 5. | The implicit rate is 5%, which is known by Pina. | |
| 6. | Collectibility of the payments is probable. |
In: Accounting
During 2020, Martinez Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available.
|
2020 |
2021 |
2022 |
||||
|---|---|---|---|---|---|---|
|
Costs incurred to date |
$405,900 | $766,500 | $1,076,000 | |||
|
Estimated costs to complete |
584,100 | 328,500 | –0– | |||
|
Billings to date |
300,000 | 893,000 | 1,610,000 | |||
|
Collections to date |
267,000 | 809,000 | 1,435,000 |
Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.
|
Gross profit recognized in 2020 |
$enter a dollar amount |
|
|---|---|---|
|
Gross profit recognized in 2021 |
$enter a dollar amount |
|
|
Gross profit recognized in 2022 |
$enter a dollar amount |
List of Accounts
Question Part Score
--/3
Prepare all necessary journal entries for 2021. (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. For costs incurred use account Materials, Cash, Payables.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
enter an account title to record cost of construction |
enter a debit amount |
enter a credit amount |
|
enter an account title to record cost of construction |
enter a debit amount |
enter a credit amount |
|
(To record cost of construction.) |
||
|
enter an account title to record progress billings |
enter a debit amount |
enter a credit amount |
|
enter an account title to record progress billings |
enter a debit amount |
enter a credit amount |
|
(To record progress billings.) |
||
|
enter an account title to record collections |
enter a debit amount |
enter a credit amount |
|
enter an account title to record collections |
enter a debit amount |
enter a credit amount |
|
(To record collections.) |
||
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
(To recognize revenue.) |
List of Accounts
Question Part Score
--/9
Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.
|
2020 |
2021 |
2022 |
||||
|---|---|---|---|---|---|---|
|
Gross profit |
$enter a dollar amount |
$enter a dollar amount |
$enter a dollar amount |
In: Accounting
During 2020, Martinez Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available.
|
2020 |
2021 |
2022 |
||||
|---|---|---|---|---|---|---|
|
Costs incurred to date |
$405,900 | $766,500 | $1,076,000 | |||
|
Estimated costs to complete |
584,100 | 328,500 | –0– | |||
|
Billings to date |
300,000 | 893,000 | 1,610,000 | |||
|
Collections to date |
267,000 | 809,000 | 1,435,000 |
Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.
|
Gross profit recognized in 2020 |
$enter a dollar amount |
|
|---|---|---|
|
Gross profit recognized in 2021 |
$enter a dollar amount |
|
|
Gross profit recognized in 2022 |
$enter a dollar amount |
List of Accounts
Question Part Score
--/3
Prepare all necessary journal entries for 2021. (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. For costs incurred use account Materials, Cash, Payables.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
enter an account title to record cost of construction |
enter a debit amount |
enter a credit amount |
|
enter an account title to record cost of construction |
enter a debit amount |
enter a credit amount |
|
(To record cost of construction.) |
||
|
enter an account title to record progress billings |
enter a debit amount |
enter a credit amount |
|
enter an account title to record progress billings |
enter a debit amount |
enter a credit amount |
|
(To record progress billings.) |
||
|
enter an account title to record collections |
enter a debit amount |
enter a credit amount |
|
enter an account title to record collections |
enter a debit amount |
enter a credit amount |
|
(To record collections.) |
||
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
enter an account title to recognize revenue |
enter a debit amount |
enter a credit amount |
|
(To recognize revenue.) |
List of Accounts
Question Part Score
--/9
Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.
|
2020 |
2021 |
2022 |
||||
|---|---|---|---|---|---|---|
|
Gross profit |
$enter a dollar amount |
$enter a dollar amount |
$enter a dollar amount |
In: Accounting
On July 31, 2020, Ivanhoe Company paid $2,750,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Ivanhoe. Conchita reported the following balance sheet at the time of the acquisition.
|
Current assets |
$830,000 |
Current liabilities |
$550,000 |
|||
|---|---|---|---|---|---|---|
|
Noncurrent assets |
2,450,000 |
Long-term liabilities |
450,000 |
|||
|
Total assets |
$3,280,000 |
Stockholders’ equity |
2,280,000 |
|||
|
Total liabilities and stockholders’ equity |
$3,280,000 |
It was determined at the date of the purchase that the fair value
of the identifiable net assets of Conchita was $2,425,000. Over the
next 6 months of operations, the newly purchased division
experienced operating losses. In addition, it now appears that it
will generate substantial losses for the foreseeable future. At
December 31, 2020, Conchita reports the following balance sheet
information.
| Current assets |
$400,000 |
||
| Noncurrent assets (including goodwill recognized in purchase) |
2,160,000 |
||
| Current liabilities |
(600,000 |
) |
|
| Long-term liabilities |
(400,000 |
) |
|
| Net assets |
$1,560,000 |
Finally, it is determined that the fair value of the Conchita
Division is $1,850,000.
(1) Compute the amount of goodwill recognized, if any, on July 31, 2020. (If answer is zero, do not leave answer field blank. Enter 0 for the amount.)
(2)Determine the impairment loss, if any, to be recorded on December 31, 2020. (If answer is zero, do not leave answer field blank. Enter 0 for the amount.)
(3)Assume that fair value of the Conchita Division is $1,490,000 instead of $1,850,000. Determine the impairment loss, if any, to be recorded on December 31, 2020. (If answer is zero, do not leave answer field blank. Enter 0 for the amount.)
(4)Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be reported in the income statement. (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.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
enter an account title |
enter a debit amount |
enter a credit amount |
|
enter an account title |
enter a debit amount |
enter a credit amount |
| This loss will be reported in income as a separate line item before the subtotal |
In: Accounting
Crane Company, a machinery dealer, leased a machine to Dexter
Corporation on January 1, 2020. The lease is for an 8-year period
and requires equal annual payments of $34,300 at the beginning of
each year. The first payment is received on January 1, 2020. Crane
had purchased the machine during 2019 for $140,000. Collectibility
of lease payments by Crane is probable. Crane set the annual rental
to ensure a 8% rate of return. The machine has an economic life of
10 years with no residual value and reverts to Crane at the
termination of the lease. Assume that Dexter Corporation does not
know the rate implicit in the lease used by Crane, and Dexter’s
incremental borrowing rate is 10%. In addition, assume that Dexter
incurs initial direct costs of $12,000.
Compute the amount of the lease liability and right-of-use asset for Dexter?
Prepare all necessary journal entries for Dexter for 2020.
(To record the lease)
(To record the first lease payment)
(To record interest expense)
(To record amortization of the right-of-use asset)
In: Accounting
The actual selling expenses incurred in March 2020 by Fallon
Company are as follows.
|
Variable Expenses |
Fixed Expenses |
|||||
|---|---|---|---|---|---|---|
| Sales commissions | $11,178 | Sales salaries | $35,100 | |||
| Advertising | 12,156 | Depreciation | 6,500 | |||
| Travel | 6,912 | Insurance | 1,900 | |||
| Delivery | 3,576 | |||||
(a) Prepare a flexible budget performance report
for March, assuming that March sales were $172,800. Variable costs
and their percentage relationship to sales are sales commissions
6%, advertising 7%, traveling 4%, and delivery 2%. Fixed selling
expenses will consist of sales salaries $35,100, Depreciation on
delivery equipment $6,500, and insurance on delivery equipment
$1,900. (List variable costs before fixed
costs.)
(b) Prepare a flexible budget performance report, assuming that March sales were $180,500. (List variable costs before fixed costs.)
In: Accounting
Sunland Incorporated leases a piece of machinery to Culver
Company on January 1, 2020, under the following terms.
| 1. | The lease is to be for 4 years with rental payments of $14,999 to be made at the beginning of each year. | |
| 2. | The machinery’ has a fair value of $78,692, a book value of $58,720, and an economic life of 10 years. | |
| 3. | At the end of the lease term, both parties expect the machinery to have a residual value of $29,360. To protect against a large loss, Sunland requests Culver to guarantee $20,770 of the residual value, which Irving agrees to do. | |
| 4. | The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. | |
| 5. | The implicit rate is 5%, which is known by Culver. | |
| 6. |
Collectibility of the payments is probable. |
Part 1) Evaluate the criteria for classification of the lease,
and describe the nature of the lease.
For the lessee, it is a _________ (operating lease, sales-type
lease, finance lease) , and for the lessor, it is a
__________( operating lease, sales-type lease, finance lease)
Part 2) Prepare the journal entries for Culver for the year
2020. (Credit account titles are automatically indented
when the 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. Round present value factor calculations to 5 decimal
places, e.g. 1.25124 and the final answer to 0 decimal places e.g.
5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1 |
|||
|
(To record lease) |
|||
|
Jan. 1 |
|||
|
(To records first lease payment) |
|||
|
Dec. 31 |
|||
|
(To record accrued interest) |
|||
|
Dec. 31 |
|||
|
(To record amortization expense) |
Prepare the journal entries for Sunland for the year 2020. (Credit account titles are automatically indented when the 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. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1 |
|||
|
(To record lease) |
|||
|
Jan. 1 |
|||
|
(To record first lease payment) |
|||
|
Dec. 31 |
|||
|
(To record lease revenue) |
Part 3) Evaluate the criteria for classification of the lease, and describe the nature of the lease, assuming that Culver did not guarantee any amount of the expected residual value.
For the lessee, it is a _________ (operating lease, sales-type lease, finance lease) , and for the lessor, it is a __________( operating lease, sales-type lease, finance lease)
Part 4)
Suppose Culver did not guarantee any amount of the expected
residual value. Prepare the journal entries for Culver for the year
2020. (Credit account titles are automatically indented
when the 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. Round present value factor calculations to 5 decimal
places, e.g. 1.25124 and the final answer to 0 decimal places e.g.
5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1 |
|||
|
(To record lease) |
|||
|
Jan. 1 |
|||
|
(To record first lease payment) |
|||
|
Dec. 31 |
|||
|
(To record interest and amortization) |
Suppose Culver did not guarantee any amount of the expected
residual value. Prepare the journal entries for Sunland for the
year 2020. (Credit account titles are automatically
indented when the 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. Round present value factor calculations to
5 decimal places, e.g. 1.25124 and the final answer to 0 decimal
places e.g. 5,275.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1 |
|||
|
(To record lease payments) |
|||
|
Dec. 31 |
|||
|
(To record lease revenue) |
|||
|
Dec. 31 |
|||
|
(To record depreciation) |
In: Accounting
6. Make revenue forecast for Pacific Shoes for 2020
based on historical data if the company generated the following
revenues for the last five years. Also, calculate the forecast
error, draw a graph with the actual and the regression line revenue
by year, and show the forecast error on the graph.
Year 2015 2016 2017 2018 2019
Revenue (Million $) 52 58 62 59 66
In: Statistics and Probability
A Company is closing its books on December 31, 2019. On January 3, 2020, a monthly freight bill of $15,000 was received. The bill specifically related to merchandise purchased in December 2019, one-third of which was still in inventory at December 31, 2019. The freight charge was not included in either the inventory or accounts payable at December 31, 2019. For both items below, indicate whether the adjustment needed is an increase or decrease by putting an “X” over increase or decrease; also enter the amount of the adjustment in the space provided.
Inventory increase decrease $_________
accounts payable increase decrease $__________
In: Accounting
The following accounts appeared on the trial balance of Ewana Company at December 31, 2020.
| Notes Payable (short-term) | $192,000 | Accounts Receivable | $518,400 | |
| Accumulated Depreciation - Bldg. | 783,000 | Prepaid Insurance | 56,250 | |
| Supplies | 37,800 | |||
| Salaries and Wages Payable | 34,200 | Common Stock | 1,125,000 | |
| Debt Investments (long-term) | 281,400 | Unappropriated Retained Earnings | 318,000 | |
| Cash | 170,250 | Inventory | 1,580,250 | |
| Bonds Payable Due 1/1/2025 | 1,200,000 | Land | 465,000 | |
| Allowance for Doubtful Accts. | 7,800 | Trading Securities | 73,200 | |
| Copyrights | 192,900 | Interest Payable | 5,700 | |
| Notes Receivable (due in 6 months) | 138,000 | Buildings | 1,926,000 | |
| Income Taxes Payable | 156,000 | Accounts Payable | 409,950 | |
| Preferred Stock | 750,000 | Additional Paid-in Capital | 163,800 | |
| Appropriated Retained Earnings | 294,000 |
Instructions: Compute each of the following. You must show your work.
1. Total current assets
2. Total property, plant, and equipment
3. Total assets
4. Total current liabilities
5. Total stockholders’ equity
In: Accounting