|
On 1 December 2013, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent-It, an equipment rental company that was going out of business. The newly formed company uses the following accounts: |
| Cash | Share Capital |
| Accounts Receivable | Retained Earnings |
| Prepaid Rent | Dividends |
| Unexpired Insurance | Income Summary |
| Office Supplies | Rental Fees Earned |
| Rental Equipment | Salaries Expense |
| Accumulated Depreciation: Rental Equipment | Maintenance Expense |
| Notes Payable | Utilities Expense |
| Accounts Payable | Rent Expense |
| Interest Payable | Office Supplies Expense |
| Salaries Payable | Depreciation Expense |
| Dividends Payable | Interest Expense |
| Unearned Rental Fees | Income Taxes Expense |
| Income Taxes Payable |
|
The corporation performs adjusting entries monthly. Closing entries are performed annually on 31 December. During December, the corporation entered into the following transactions: |
| Dec. | 1 |
Issued to John and Patty Driver 30,000 new shares in exchange for a total of $300,000 cash. |
| Dec. | 1 |
Purchased for $220,800 all of the equipment formerly owned by Rent-It. Paid $139,000 cash and issued a one-year note payable for $81,800. The notes, plus all 12-months of accrued interest, are due 30 November 2013. |
| Dec. | 1 |
Paid $10,500 to Shapiro Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent-It. |
| Dec. | 4 |
Purchased office supplies on account from Modern Office Co., $1,400. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.) |
| Dec. | 8 |
Received $8,900 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.) |
| Dec. | 12 | Paid salaries for the first two weeks in December, $5,000. |
| Dec. | 15 |
Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,000, of which $12,200 was received in cash. |
| Dec. | 17 |
Purchased on account from Earth Movers Limited, $600 in parts needed to repair a rental tractor. (Debit an expense account.) Payment is due in 10 days. |
| Dec. | 23 | Collected $2,600 of the accounts receivable recorded on15 December. |
| Dec. | 26 |
Rented a backhoe to Mission Landscaping at a price of $330 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks. |
| Dec. | 26 | Paid biweekly salaries, $5,000. |
| Dec. | 27 | Paid the account payable to Earth Movers Limited, $600. |
| Dec. | 28 | Declared a dividend of 10 cents per share, payable on 15 January 2014. |
| Dec. | 29 |
Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co-defendant in a $26,000 lawsuit filed on behalf of Kevin Davenport. Mission Landscaping had left the rented backhoe in a fenced construction site owned by Collier Construction. After working hours on 26 December, Davenport had climbed the fence to play on parked construction equipment. While playing on the backhoe, he fell and broke his arm. The extent of the company’s legal and financial responsibility for this accident, if any, cannot be determined at this time. ( Note: This event does not require a journal entry at this time, but may require disclosure in notes accompanying the statements.) |
| Dec. | 29 |
Purchased a 12-month public-liability insurance policy for $8,400. This policy protects the company against liability for injuries and property damage caused by its equipment. However, the policy goes into effect on 1 January 2014, and affords no coverage for the injuries sustained by Kevin Davenport on 26 December. |
| Dec. | 31 |
Received a bill from Universal Utilities for the month of December, $690. Payment is due in 30 days. |
| Dec. | 31 |
Equipment rental fees earned during the second half of December amounted to $20,200, of which $16,300 was received in cash. |
| Data for Adjusting Entries |
| a. | The advance payment of rent on 1 December covered a period of three months. |
| b. | The annual interest rate on the note payable to Rent-It is 6 percent. |
| c. | The rental equipment is being depreciated by the straight-line method over a period of eight years. |
| d. | Office supplies on hand at 31 December are estimated at $670. |
| e. |
During December, the company earned $4,600 of the rental fees paid in advance by McNamer Construction Co.on 8 December. |
| f. |
As of 31 December, six days’ rent on the backhoe rented to Mission Landscaping on 26 December has been earned. |
| g. |
Salaries earned by employees since the last payroll date (26 December) amounted to $1,800 at month-end. |
| h. |
It is estimated that the company is subject to an income tax rate of 30 percent of profit before income taxes (total revenue minus all expenses other than income taxes). These taxes will be payable in 2014. |
|
Prepare closing entries and post to ledger accounts. (Do not round intermediate calculations. Omit the "$" sign in your response.) |
| Date | General Journal | Debit | Credit |
| Dec. 31 | (Click to select)Rent expenseIncome summarySalaries expenseUtilities expenseRent fees earnedOffice supplies expenseMaintenance expenseAccounts payableDividendsIncome taxes expense | ||
| (Click to select)Utilities expenseAccounts payableDividendsRent fees earnedMaintenance expenseSalaries expenseOffice supplies expenseIncome taxes expenseRent expenseIncome summary | |||
| 31 | (Click to select)Depreciation expenseInterest expenseOffice supplies expenseRent expenseAccounts payableUtilities expenseMaintenance expenseIncome taxes expenseSalaries expenseIncome summary | ||
| (Click to select)Salaries expenseDepreciation expenseUtilities expenseIncome taxes expenseMaintenance expenseOffice supplies expenseRent expenseInterest expenseDividendsIncome summary | |||
| (Click to select)Salaries expenseOffice supplies expenseDepreciation expenseDividendsRent expenseIncome summaryMaintenance expenseIncome taxes expenseInterest expenseUtilities expense | |||
| (Click to select)Rent expenseUtilities expenseIncome taxes expenseDepreciation expenseSalaries expenseInterest expenseDividendsMaintenance expenseIncome summaryOffice supplies expense | |||
| (Click to select)Maintenance expenseDividendsSalaries expenseInterest expenseDepreciation expenseUtilities expenseIncome summaryOffice supplies expenseIncome taxes expenseRent expense | |||
| (Click to select)Rent expenseMaintenance expenseOffice supplies expenseInterest expenseSalaries expenseIncome summaryUtilities expenseDividendsDepreciation expenseIncome taxes expense | |||
| (Click to select)Income summaryMaintenance expenseInterest expenseIncome taxes expenseUtilities expenseSalaries expenseDepreciation expenseOffice supplies expenseRent expenseDividends | |||
| (Click to select)Utilities expenseDepreciation expenseOffice supplies expenseRent expenseInterest expenseDividendsMaintenance expenseIncome taxes expenseIncome summarySalaries expense | |||
| (Click to select)Income taxes expenseSalaries expenseDepreciation expenseInterest expenseDividendsOffice supplies expenseIncome summaryRent expenseUtilities expenseMaintenance expense | |||
| 31 | (Click to select)Salaries payableNotes payableDepreciation expenseRent expenseIncome summaryInterest expenseIncome taxes expenseRetained earningsAccounts receivableAccounts payable | ||
| (Click to select)Salaries payableRetained earningsInterest expenseRent expenseAccounts receivableIncome taxes expenseIncome summaryNotes payableDepreciation expenseAccounts payable | |||
| 31 | (Click to select)Interest expenseUtilities expenseMaintenance expenseDepreciation expenseRetained earningsSalaries expenseDividendsOffice supplies expenseRent expenseIncome taxes expense | ||
| (Click to select)Interest expenseRetained earningsSalaries expenseMaintenance expenseIncome taxes expenseDepreciation expenseUtilities expenseOffice supplies expenseDividendsRent expense | |||
In: Accounting
Ahmad, Bong and Cathy are the directors of Alpha Sdn Bhd (“Alpha”), a private limited company situated in Bandar Sunway. The company is involved in the leisure and hospitality business covering theme parks, gaming, hotels, seaside resorts and entertainment for over 50 years. Each of the directors holds 15% of the company’s share capital. Answer the following separate and independent questions:
a. Beta Bhd (“Beta”) is a public limited company. The company wishes to enter into a contract with “Alpha” for the supply of iron and steel to be used for Alpha’s theme parks. The Board of Directors of “Alpha” had a meeting last month to decide on the matter. They decided that the company will proceed with the contract with “Beta”. However, recently, after entering and completing the contract, they discovered that the Managing Director of “Beta” is Bakar, who is a good friend of Bong.
b. Recently, “Alpha” contracted to buy a piece of land from
Ahmad which was to be converted to a water theme park. The market
value of the land is RM 600,000. “Alpha” bought the property at RM
550,000.
Advise the Board of Directors of “Alpha” on the legal issues
arising in the above questions.
In: Accounting
You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Joe Swan. Joe found a method to manufacture a cheaper battery with much greater energy density than was previously possible, giving a car powered by the battery a range of 700 miles before requiring a charge. The cars manufactured by SMI are midsized and carry a price that allows the company to compete with other mainstream auto manufacturers. The company is privately owned by Joe and his family, and it had sales of $97 million last year.
SMI primarily sells to customers who buy the cars online, although it does have a limited number of company-owned dealerships. Most sales are online. The customer selects any customization and makes a deposit of 20 percent of the purchase price. After the order is taken, the car is made to order, typically within 45 days. SMI’s growth to date has come from its profits. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Joe has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Joe would like you to perform the analysis. Because the company is privately owned, it is difficult to determine the cost of equity for the company. Joe wants you to use the pure play approach to estimate the cost of capital for SMI, and he has chosen Tesla Motors as a representative company. The following questions will lead you through the steps to calculate this estimate.
1. Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the previous quarter or year, respectively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC website, follow the “Search for Company Filings” link and the “Companies & Other Filers” link, enter “Tesla,” and search for SEC filings made by Tesla. Find the most recent 10Q and 10K and download the forms. Look on the balance sheet to find the book value of debt and the book value of equity. If you look further down the report, you should find a section titled either “Long-Term Debt” or “Long-Term Debt and Interest Rate Risk Management” that will list a breakdown of Tesla’s long-term debt.
2. To estimate the cost of equity for Tesla, go to finance.yahoo.com and enter the ticker symbol “TSLA.” Follow the various links to find answers to the following questions: What is the most recent stock price listed for Tesla? What is the market value of equity, or market capitalization? How many shares of stock does Tesla have outstanding? What is the beta for Tesla? Now go back to finance.yahoo.com and follow the “Bonds” link. What is the yield on 3-month Treasury bills? Using a 7 percent market risk premium, what is the cost of equity for Tesla using the CAPM?
3. Go to www.reuters.com and find the list of competitors in the industry. Find the beta for each of these competitors, and then calculate the industry average beta. Using the industry average beta, what is the cost of equity? Does it matter if you use the beta for Tesla or the beta for the industry in this case?
4. You now need to calculate the cost of debt for Tesla. Go to finra-markets.morningstar.com/BondCenter/Results.jsp, enter Tesla as the company, and find the yield to maturity for each of Tesla’s bonds. What is the weighted average cost of debt for Tesla using the book value weights and the market value weights? Does it make a difference in this case if you use book value weights or market value weights?
5. You now have all the necessary information to calculate the weighted average cost of capital for Tesla. Calculate the weighted average cost of capital for SMI using book value weights and market value weights assuming SMI has a 35 percent marginal tax rate. Which cost of capital number is more relevant? 6. You used Tesla as a representative company to estimate the cost of capital for SMI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?
In: Accounting
You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Joe Swan. Joe found a method to manufacture a cheaper battery with much greater energy density than was previously possible, giving a car powered by the battery a range of 700 miles before requiring a charge. The cars manufactured by SMI are midsized and carry a price that allows the company to compete with other mainstream auto manufacturers. The company is privately owned by Joe and his family, and it had sales of $97 million last year. SMI primarily sells to customers who buy the cars online, although it does have a limited number of company-owned dealerships. Most sales are online. The customer selects any customization and makes a deposit of 20 percent of the purchase price. After the order is taken, the car is made to order, typically within 45 days. SMI’s growth to date has come from its profits. When the company had sufficient capital, it would expand production. Relatively little formal analysis has been used in its capital budgeting process. Joe has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Joe would like you to perform the analysis. Because the company is privately owned, it is difficult to determine the cost of equity for the company. Joe wants you to use the pure play approach to estimate the cost of capital for SMI, and he has chosen Tesla Motors as a representative company. The following questions will lead you through the steps to calculate this estimate.
1.Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the previous quarter or year, respectively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC website, follow the “Search for Company Filings” link and the “Companies & Other Filers” link, enter “Tesla,” and search for SEC filings made by Tesla. Find the most recent 10Q and 10K and download the forms. Look on the balance sheet to find the book value of debt and the book value of equity. If you look further down the report, you should find a section titled either “Long-Term Debt” or “Long-Term Debt and Interest Rate Risk Management” that will list a breakdown of Tesla’s long-term debt.
2. To estimate the cost of equity for Tesla, go to finance.yahoo.com and enter the ticker symbol “TSLA.” Follow the various links to find answers to the following questions: What is the most recent stock price listed for Tesla? What is the market value of equity, or market capitalization? How many shares of stock does Tesla have outstanding? What is the beta for Tesla? Now go back to finance.yahoo.com and follow the “Bonds” link. What is the yield on three-month Treasury bills? Using a 7 percent market risk premium, what is the cost of equity for Tesla using the CAPM?
3. Go to www.reuters.com and find the list of competitors in the industry. Find the beta for each of these competitors, and then calculate the industry average beta. Using the industry average beta, what is the cost of equity? Does it matter if you use the beta for Tesla or the beta for the industry in this case?
4-You now need to calculate the cost of debt for Tesla. Go to finra-markets.morningstar .com/BondCenter/Results.jsp, enter Tesla as the company, and find the yield to maturity for each of Tesla’s bonds. What is the weighted average cost of debt for Tesla using the book value weights and the market value weights? Does it make a difference in this case if you use book value weights or market value weights?
5. You now have all the necessary information to calculate the weighted average cost of capital for Tesla. Calculate the weighted average cost of capital for SMI using book value weights and market value weights assuming SMI has a 35 percent marginal tax rate. Which cost of capital number is more relevant?
6. You used Tesla as a representative company to estimate the cost of capital for SMI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?
In: Finance
The following questions use the table below about a farmer looking to sell soybeans later this year.
| Now | Later | |
| Cash Soybeans Market |
$7.83/bu |
$8.58/bu |
| Futures Soybeans Market |
$7.58/bu |
$8.33/bu |
1) Is the individual concerned about price increasing or decreasing?
2) What is the initial action in the futures market: buy or sell?
3) What is the cash price paid/received by the individual later?
4) Did the individual earn a profit or loss in this hedging situation? Enter profit or loss in the following blank.
5) What is the value (i.e. amount) of the profit/loss on the hedge for one contract (signs matter)?
6) The farmer expects to hedge 3 contracts with each contract representing 5,000 bushels. What is the total (dollar) value of the profit/loss on this hedge?
7) What is the hedged price per bushel on this transaction?
8) If the individual didn't hedge, what would have been the price paid/received for cash soybeans?
9) The individual made the right decision to hedge: Yes or No.
In: Finance
The following questions use the table below on soybean oil. Answer the following questions about an end user needing to purchase soybean oil. One soybean oil contract is 60,000 pounds (lbs).
| Now | Later | |
| Cash Soybean Meal Market | $0.335/lb | $0.346/lb |
| Futures Soybean Meal Market | $0.3000/lb | $0.311/lb |
1) Is the individual concerned about price increasing or decreasing?
2) What is the initial action in the futures market: buy or sell?
3) What is the cash price paid/received by the individual later?
4) Did the individual earn a profit or loss in this hedging situation? Enter profit or loss in the following blank.
5) What is the value (i.e. amount) of the profit/loss on the hedge for one contract (signs matter)?
6) What is the hedged price per bushel on this transaction?
7) If the individual didn't hedge, what would have been the price paid/received for the cash commodity?
8) The individual made the right decision to hedge: Yes or No.
9) What is the net selling (or purchase) price?
In: Finance
Suppose that the annual demand for a component is approximately 56,000 units. The company orders the component from a supplier who has offered the following quantity discount schedule.
| Order Quantity | 0-999 | 1,000-1,499 | 1,500-3,499 | 3,500or more |
| Price Per Unit | $33 | $31 | $29 | $27 |
If the company's carrying charge is 25% of the item's price and the cost per order is $330, determine the order quantity that would minimize the total related inventory costs for this component.
The company's decision would be to order ____ Units.
The total annualized ordering costs for this quantity is____
In: Operations Management
Most successful businesses today actively develop loyal customers who buy their brands again and again. After all, getting current customers to buy more is much easier than constantly seeking new customers. In business, it’s called the 80/20 rule—80% of your business revenues come from the most loyal 20% of your customers.
Think of three brands that you buy on a regular basis. Why do you stick to these products? How could another company dislodge you? Discuss. [approximately 200 words]
In: Accounting
It has been hypothesized that, on average, employees spend one hour a day playing video games at work. To test this at her company, a manager takes a random sample of 35 employees, who showed a mean time of 55 minutes per day, with an assumed population standard deviation of 5 minutes. Calculate the test statistic What is the critical value for testing these hypotheses at α = .01? Calculate a confidence interval to test the hypotheses that the employees spend a different amount of time from one hour (60 minutes) at α = .01 and interpret.
In: Statistics and Probability
Calculate openness as a percentage for Paraguay and Poland. Explain how you calculated openness, i.e., write down the formula. Using a graph of Openness (as a percentage) versus time, explain in up to 200 words how openness has changed for these countries from 2001 to 2014. Put Paraguay and Poland in the same graph and make sure your graph is properly labelled.
| Country Name | Country Code | Series Name | Series Code | 2001 [YR2001] | 2002 [YR2002] | 2003 [YR2003] | 2004 [YR2004] | 2005 [YR2005] | 2006 [YR2006] | 2007 [YR2007] | 2008 [YR2008] | 2009 [YR2009] | 2010 [YR2010] | 2011 [YR2011] | 2012 [YR2012] | 2013 [YR2013] | 2014 [YR2014] |
| Paraguay | PRY | Exports of goods and services (current US$) | NE.EXP.GNFS.CD | 3459319570 | 3402825624 | 3625989129 | 4371893087 | 5083809323 | 6252319090 | 7818347667 | 9993980610 | 8210295841 | 11036468064 | 13186264509 | 12278348692 | 14356651476 | 13954911448 |
| Paraguay | PRY | GDP (current US$) | NY.GDP.MKTP.CD | 7662595076 | 6325151760 | 6588103836 | 8033877360 | 8734653809 | 10646157920 | 13794910634 | 18504130753 | 15929902138 | 20030528043 | 25099681461 | 24595319574 | 28965906502 | 30881166852 |
| Paraguay | PRY | GDP per capita (current US$) | NY.GDP.PCAP.CD | 1417 | 1148 | 1175 | 1409 | 1507 | 1810 | 2312 | 3060 | 2600 | 3226 | 3988 | 3856 | 4480 | 4713 |
| Paraguay | PRY | GINI index (World Bank estimate) | SI.POV.GINI | 55 | 57 | 56 | 53 | 51 | 54 | 52 | 51 | 50 | 52 | 53 | 48 | 48 | 52 |
| Paraguay | PRY | Imports of goods and services (current US$) | NE.IMP.GNFS.CD | 2727373823 | 2298406126 | 2623501714 | 3307792347 | 4018039423 | 5221045741 | 6461917817 | 9166237324 | 7130137358 | 10313046052 | 12621883682 | 11979621541 | 12983600420 | 13242370791 |
| Poland | POL | Exports of goods and services (current US$) | NE.EXP.GNFS.CD | 51878648721 | 57137009804 | 72632296220 | 87410323710 | 105952277925 | 130565028203 | 165538367008 | 202086584758 | 163740453116 | 191967370760 | 225042181278 | 222344181762 | 242809098962 | 259386390289 |
| Poland | POL | GDP (current US$) | NY.GDP.MKTP.CD | 190521263343 | 198680637255 | 217518642325 | 255102252843 | 306134635594 | 344826430298 | 429249647595 | 533815789474 | 440346575958 | 479257883742 | 528725113046 | 500284003684 | 524201151607 | 545075908846 |
| Poland | POL | GDP per capita (current US$) | NY.GDP.PCAP.CD | 4981 | 5197 | 5694 | 6681 | 8021 | 9041 | 11260 | 14001 | 11542 | 12598 | 13891 | 13144 | 13780 | 14340 |
| Poland | POL | GINI index (World Bank estimate) | SI.POV.GINI | 33 | 34 | 35 | 35 | 35 | 34 | 34 | 34 | 34 | 33 | 33 | 32 | 33 | 32 |
| Poland | POL | Imports of goods and services (current US$) | NE.IMP.GNFS.CD | 58766945944 | 63908088235 | 78406788377 | 94256069554 | 109183717624 | 137680257857 | 180703003578 | 228993441806 | 167514280213 | 201543256955 | 235386043059 | 224546822229 | 232598709188 | 251529270071 |
In: Economics