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)

The actual selling expenses incurred in March 2020 by Fallon Company are as follows.

(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.)

Sunland Incorporated leases a piece of machinery to Culver Company on January 1, 2020, under the following terms.

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.)

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.)

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.)

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.)

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

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 $__________

The following accounts appeared on the trial balance of Ewana Company at December 31, 2020.

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

During 2020, Shamrock Company started a construction job with a contract price of $1,600,000. The job was completed in 2022. The following information is available.

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

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.)

Compute the amount of gross profit to be recognized each year, assuming the completed-contract method is used.

CSI Products Ltd., a public company, purchased a patent on January 1, 2020, for $ 1,120,000. At the time of the purchase, the patent had a remaining legal life of 20 years. In January 2023, CSI spent $ 92,000 successfully defending the patent in court. One of the other results of the court case was the discovery that the patent would only have a remaining useful life of 9 years. CSI’s year end was December 31.

Instructions Prepare the entries on the books of CSI to record

a) To record the purchase of the patent

b) To record the legal defence of the patent

c) To record 2023 amortization

Part B. The owners of Amazon Corp. are planning to sell the business. The cumulative earnings for the past five years are $ 600,000 including non-recurring losses of $ 100,000. The annual earnings based on an average rate of return for this industry would be $ 80,000. If excess earnings are to be capitalized at 12%, what is the implied goodwill?

Bell Company, a manufacturer of audio systems, started its production in October 2020. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory.

Raw material costs for an audio system will total $77 per unit. Workers on the production lines are on average paid $15 per hour. An audio system usually takes 7 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $6,000 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,800.

Factory janitorial costs are $2,200 monthly. Advertising costs for the audio system will be $9,200 per month. The factory building depreciation expense is $6,000 per year. Property taxes on the factory building will be $9,600 per year.

Assuming that Bell manufactures, on average, 1,000 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.

Marigold Company has the following investments as of December 31, 2020:

In both investments, the carrying value and the fair value of these two investments are the same at December 31, 2020. Marigold’s stock investments does not result in significant influence on the operations of Laser Company. Marigold’s debt investment is considered held-to-maturity. At December 31, 2021, the shares in Laser Company are valued at $990,000; the debt investment securities of FourSquare are valued at $2,310,000 and are considered impaired.

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare the journal entry to record the impairment of the debt securities at December 31, 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.)

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Partially correct answer iconYour answer is partially correct.

Assuming the fair value of the Laser shares is $1,320,000 and the value of its debt investment is $2,790,000, what entries, if any, should be recorded in 2022 related to impairment? (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.)

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New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Assume that the debt investment in FourSquare Company was available-for-sale and the expected credit loss was $880,000. Prepare the journal entry to record this impairment on December 31, 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.)