On January 1, 2020, Agent Z Company entered into a lease with Overlord Company for a new equipment.
The lease stipulates that annual payments of P1,000,000 will be made for five years starting December
31, 2020.
Agent Z Company guaranteed a residual value of P474,060 at the end of the 5-year period. The
equipment will revert to the lessor at the lease expiration. The implicit rate for the lease is 16% after
considering the guaranteed residual value. The economic life of the equipment is 10 years.
Questions:
1. How much is right-of-use asset account on January 1, 2020?
2. The carrying amount of lease liability on December 31, 2021 is
3. What is the carrying amount of right-of-use asset on December 31, 2022?
4. How much is the gain or loss on finance lease to be recognized at the end of the lease term?

Assume that today is December 31, 2019, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2020 is expected to be $650 million.
The depreciation expense for 2020 is expected to be $110 million.
The capital expenditures for 2020 are expected to be $375 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 6% per year.
The required return on equity is 13%.
The WACC is 12%.
The firm has $210 million of non-operating assets.
The market value of the company's debt is $3.940 billion.
180 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.

$  

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.]

• Initially, the bond was sold for the premium price of $1,025.

• On October 15, 2020, this bond was selling for only $975.

• The market rate of interest for a riskless corporate bond, of this maturity, was 4.5% on October 15, 2016, which reflects market expectations about future rates of inflation.

• The market rate of interest for a riskless corporate bond, of this maturity, was 4.0% on October 15, 2020, which reflects market expectations about future rates of inflation.

Question: What was the nominal yield on this bond on October 15, 2016?  [To 1 decimal place.]

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.]

• Initially, the bond was sold for the premium price of $1,025.

• On October 15, 2020, this bond was selling for only $975.

• The market rate of interest for a riskless corporate bond, of this maturity, was 4.5% on October 15, 2016, which reflects market expectations about future rates of inflation.

• The market rate of interest for a riskless corporate bond, of this maturity, was 4.0% on October 15, 2020, which reflects market expectations about future rates of inflation.

Question-  What was the risk premium for this bond on October 15, 2016? [To 3 decimal places.]

Rayya Co. purchases and installs a machine on January 1, 2016, at a total cost of $142,800. Straight-line depreciation is taken each year for four years assuming a eight-year life and no salvage value. The machine is disposed of on July 1, 2020, during its fifth year of service.

Prepare entries to record the partial year’s depreciation on July 1, 2020.

Record the depreciation expense as of July 1, 2020.

Prepare entries to record the disposal under the following separate assumptions:

1. The machine is sold for $71,400 cash.|

Record the sale of machinery for $71,400 cash.

2. An insurance settlement of $59,976 is received due to the machine’s total destruction in a fire.

Record the insurance settlement received of $59,976 resulting from the total destruction of the machine in a fire.

Question 2: Revised depreciation – betterment

Nova Scotia Telecom Company had a truck that was purchased on July 7, 2018, for $36000. The PPE subledger shows the following information regarding the truck:

A customized tool carrier was constructed and permanently fitted to the truck on July 3, 2020 at a cost of $9600 cash. The tool carrier adds to the economic value of the truck. It will be used for the truck’s remaining life and have a zero-residual value. The useful life and residual value of the truck did not change as a result of the addition of the tool carrier.

Required:
1. Record the installation of the tool carrier assuming it is a component of the truck
2. Calculate depreciation on the truck and its new component, the tool carrier for the company’s December 31, 2020 year ends
3. Calculate the book value of the truck at December 31, 2020 and 2021

Assume that today is December 31, 2019, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2020 is expected to be $600 million.
The depreciation expense for 2020 is expected to be $70 million.
The capital expenditures for 2020 are expected to be $200 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 7% per year.
The required return on equity is 13%.
The WACC is 11%.
The firm has $193 million of non-operating assets.
The market value of the company's debt is $3.690 billion.
90 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.

you manage a portfolio that receives dividends and makes payments in irregular intervals during the year. You begin on January 1 2020 with KES 10,000,000 in the portfolio. You invest it at a daily rate of 0.03%. On January 17, you receive a dividend of KES 500,000 on and on January 24, you make a payment of KES 250,000. Assume that the daily rate of 0.03% is constant throughout the month of January 2020.

Now answer the questions that follow

1) What is the ending value of the portfolio on January 31?

write to the nearest one e.g. 574203

2What is the geometric mean return for the month of January 2020? Write as a % to 2 d.p. e.g 10.92.

Don't include the % sign!

3)What is the value of the portfolio after 17 days? Answer to the nearest one

Recording Asset Retirement Obligation

BPP Company maintains underground storage tanks for its operations. A new storage tank was installed and made ready for use at a cost of $400,000 on January 1, 2020. The useful life is estimated at 15 years, at which time the company is legally required to remove the tank and restore the area at an estimated cost of $40,000. The appropriate discount rate for the company is 12%.

Answer the following questions, rounding your answers to the nearest whole number.

a. Record the storage tank asset and the related asset retirement obligation on January 1, 2020.

b. Record any required adjusting entries on December 31 2020.

c. Assume that on December 31, 2035, the tank is safely removed at a cost of $46,000. Record the required journal entry.

Assume that today is December 31, 2019, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2020 is expected to be $550 million.
The depreciation expense for 2020 is expected to be $150 million.
The capital expenditures for 2020 are expected to be $450 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 7% per year.
The required return on equity is 13%.
The WACC is 10%.
The firm has $208 million of non-operating assets.
The market value of the company's debt is $3.110 billion.
190 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations.