Mariner Corporation, which manufactures sail boats, ordered dry dock equipment from Brown Corporation. This equipment was built for the specialized needs of Mariner, and could not be used by any other company. Instead of purchasing the equipment, Mariner elected to enter into a long term lease agreement with Brown Co. The lease contract was signed on January 1, 2020. It calls for 12 payments of $15,000, with the first one due on December 31, 2020. The lessor’s implicit interest rate is not known. Mariner’s incremental borrow rate is 8%.
a. Is this lease a finance or operating lease? Explain.
b. Present the journal entry to be made by Mariner when the lease is signed.
c. Show the journal entry that Mariner will make for the December 31, 2020 payment.
In: Accounting
Mariner Corporation, which manufactures sail boats, ordered dry dock equipment from Brown Corporation. This equipment was built for the specialized needs of Mariner, and could not be used by any other company. Instead of purchasing the equipment, Mariner elected to enter into a long term lease agreement with Brown Co. The lease contract was signed on January 1, 2020. It calls for 12 payments of $15,000, with the first one due on December 31, 2020. The lessor’s implicit interest rate is not known. Mariner’s incremental borrow rate is 8%. a. Is this lease a finance or operating lease? Explain. b. Present the journal entry to be made by Mariner when the lease is signed. c. Show the journal entry that Mariner will make for the December 31, 2020 payment.
In: Accounting
Headland Corp. purchased machinery on January 1, 2016 for $462,000. Straight-line depreciation is used. At the time management estimated that the machinery would be used over 10 years and would have a residual value of $41,000. It is now December 31, 2020 and management has determined that the machine’s life is now a total of 12 years with no residual value. No adjusting journal entries have been recorded yet for the 2020 year-end.
What journal entries are required to record the above events on
December 31, 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.)
|
Account Titles and Explanation |
Debit |
Credit |
In: Accounting
Shamrock Company reports pretax financial income of $76,100 for 2020. The following items cause taxable income to be different than pretax financial income.
| 1. | Depreciation on the tax return is greater than depreciation on the income statement by $16,700. | |
| 2. | Rent collected on the tax return is greater than rent recognized on the income statement by $22,700. | |
| 3. | Fines for pollution appear as an expense of $11,100 on the income statement. |
Shamrock’s tax rate is 30% for all years, and the company expects
to report taxable income in all future years. There are no deferred
taxes at the beginning of 2020.
(a)
Compute taxable income and income taxes payable for 2020.
| Taxable income |
$enter a dollar amount |
|
|---|---|---|
| Income taxes payable |
$enter a dollar amount |
In: Accounting
Suppose an economy has enough labor, capital, and land to produce 1,000 apples per year. Apples are the only product of the economy and the price is $10 per apple. In 2019, money supply is $5, 000 and velocity of money is constant.
a. State the quantity theory of money.
b. Compute nominal GDP and velocity of money in 2019.
In 2020, the central bank of the economy increases the money supply by 10%.
c. Compute nominal GDP and price level in 2020. What is the inflation rate between 2019 and 2020?
d. According to the Fisher effect,
i. how are nominal and real interest rates related to one another?
ii. what will be the impact of the increase in money supply by 10% on nominal and real interest rates respectively?
In: Economics
Suppose you are on the Board of Governors of the Federal Reserve System of the United States (US) economy and are reviewing the following hypothetical economic data in 2019-2020: Real GDP per capita growth rate = 3.1% Unemployment rate = 3.2% Inflation rate = 5.3%
a.Determine what phase of the business cycle the US economy is likely to be experiencing in 2019-2020. Provide specific reasons for your answer
b. Use a well-labelled AD/AS diagram to show the position of this economy in 2019-2020. Explain whether the US government should use expansionary or contractionary monetary policy to move the economy back to the long run, fullemployment GDP equilibrium. Draw the AD curve shift(s) associated with this policy change on your diagram.
In: Economics
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In: Accounting
On 1 July 2019, Gail Ltd acquired all the issued shares of Ray
Ltd for $90 000. The financial statements of Ray Ltd showed the
equity of Ray Ltd at that date to be:
Share capital-10000 $5 50,000
General reserve 25000
Retained earning 15000
All the assets and liabilities of Ray Ltd were recorded at amounts
equal to their fair values at that date.
During the year ending 30 June 2020, Ray Ltd undertook the
following actions.
• On 1 January 2020, transferred $5 000 from the general reserve
existing at 1 July 2019 to retained earnings.
Required:
(a) Prepare the pre-acquisition entries at 1 July 2019.
(b) Prepare the pre-acquisition entries at 30 June 2020.
In: Accounting
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In: Accounting
Parker Corp. develops computer video games for sale. A new development project which began in 2018 reached technological feasibility at the end of Sept. 2019 and the project was available for release to customers early in 2020. Development costs incurred prior to Sept. 30 were $1,600,000 and costs incurred from Oct. 1 to product availability were $1,200,000. Revenues in 2020 from the sale of the new product were $4,000,000 and the company anticipates another $12,000,000 in revenues. The economic life of the software is 3 years.
(a) What amount should Parker capitalize as an intangible asset?
(b) What amount should be amortized in 2020?
(c) At the beginning of 2021, Parker estimates the net realizable value of the software to be $500,000. Prepare any entries required.
In: Accounting