Question 4

On 1 January 2020, Lessee Ltd entered into a two-years lease with Lessor Ltd for a equipment. The contract contains an option to extend the lease term for a further a year. Lessee Ltd ascertained that it is reasonably certain to exercise this option. The equipment has a useful economic life of 10 years.

Lease payments are $25,000 per year for the initial term and $45,000 per year for the period when the option is exercised. All payments are due at the end of the year (i.e. 31 December). To obtain the lease, Lessee Ltd incurs initial direct costs of $12,500 on 1 January 2020. The interest rate within the lease is not readily determinable. Lessee Ltd s incremental rate of borrowing is 5%. Assume the initial direct cost was paid by Lessee Ltd to third party rather than to Lessor Ltd

Required: a. Calculate the initial carrying amount of the lease liability and the right-of-use asset and prepare the relevant double entries on 1 January 2020

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

On 1 July 2017, Cambridge Ltd paid $250,000 cash to acquire a machine. On this date it was estimated that the machine had a useful life of ten years and a residual value of $30,000. In accordance with AASB 116 Property, Plant and Equipment, Cambridge Ltd uses the revaluation model as its accounting policy to measure items of property, plant and equipment and the straight-line method of depreciation. Cambridge Ltd has a 30 June reporting date.

An independent valuer provided the following fair values for the machine:

Reporting date Fair value

30 June 2018 $255,000

30 June 2019 210,000

30 June 2020 173,500

On 31 December 2020, the machine was sold for $160,000 cash. Required Prepare the journal entries to account for the events and transactions in relation to the machine between 1 July 2017 and 31 December 2020. you are also required to show the calculations at the end and explain all the criteria in relation to the AASB 116 Plant, Propert and Equipment.

Pharoah Company’s comparative balance sheets are presented below:

Pharoah Company
Comparative Balance Sheets
December 31

2020

2019

Cash

$ 17,000

$ 17,500

Accounts receivable

25,000

22,400

Investments

19,850

16,050

Equipment

60,050

69,750

Accumulated depreciation—equipment

(13,750

)

(10,400

)

   Total

$108,150

$115,300

Accounts payable

$ 14,750

$ 11,250

Bonds payable

10,400

30,000

Common stock

49,500

45,200

Retained earnings

33,500

28,850

   Total

$108,150

$115,300

Additional information:

1.Net income was $18,450. Dividends declared and paid were $13,800.

2.Equipment which cost $9,700 and had accumulated depreciation of $1,700 was sold for $3,300.

3.No noncash investing and financing activities occurred during 2020

Prepare a statement of cash flows for 2020 using the indirect method.

Compute free cash flow. (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Q1: Rumsfeld Corporation leased a machine on December 31, 2020, for a three-year period. The lease agreement calls for annual payments in the amount of $18,000 on December 31 of each year beginning on December 31, 2020. Rumsfeld has the option to purchase the machine on December 31, 2023, for $20,000 when its fair value is expected to be $40,000. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this lease is 12%.

n, i                               PV of $1              PV, ordinary annuity               PV, annuity due

1 period, 12%                0.89286                                      0.89286                             1.00000

2 periods, 12%              0.79719                                      1.69005                             1.89286

3 periods, 12%              0.71178                                      2.40183                             2.69005

Required:

Round your answers to the nearest whole dollar amounts.

1. Calculate the amount to be recorded as a right-of-use asset and the associated lease payable.
2. Prepare an amortization schedule for Rumsfeld.
3. Prepare Rumsfeld's journal entries for this lease for 2020, 2021, 2022, and 202

Question 1
(Note this question is from the Week 5 Tutorial)
Sandox Retail has the following unadjusted trial balance as at 30 June 2020 in the table:
Accounts
Debit ($)
Credit ($)
Cash
8,524
Accounts Receivable
7,000
Supplies
15,000
Prepaid Insurance
300
Insurance Expense
600
Equipment
27,000
Accumulated Depreciation
12,000
Other Assets
5,100
Wages Payable
1,500
Accounts Payable
7,500
Income Tax Payable
3,150
Share Capital (3000 shares outstanding all year)
16,000
Retained Profit
10,300
Sales Revenue
95,000
COGS
32,900
Wages Expense
18,000
Supplies Expense
25,680
Income Tax Expense
5,346
Total
145,450
145,450
3
Question 1 (Cont’d)
Required:
a) Prepare an Income Statement for Sandox Retail for the financial year 2019-2020. (2.5 marks)
b) Prepare a Balance Sheet as of 30 June 2020. (2.5 marks)
c) Prepare the closing journals for Sandox Retail.

Referring to the following data of the Omani Company, that extracted from the balance sheet at 31\12\2019, answer the following questions: -          (Note; Write all Equations regarding the questions)

1. The company manager targets to reduce the current ratio in the year (2020) by 33% from the previous year (2019), this requiring to downsize the amount of the total current asset. To what level can the manager reduce the total current asset to achieve this target at (2020)? (Suppose the other things are fixed)
2. The manager put a plan to reduce the selling period in the (2020) by (16.7%) from the previous year (2019). Calculate the new inventory turnover.

(Suppose the other things are fixed)

Referring to the following data of the Omani Company, that extracted from the balance sheet at 31\12\2019, answer the following questions: -       (Note; Write all Equations regarding the questions)

1. The company manager targets to reduce the current ratio in the year (2020) by 33% from the previous year (2019), this requiring to downsize the amount of the total current asset. To what level can the manager reduce the total current asset to achieve this target at (2020)? (Suppose the other things are fixed)
2. The manager put a plan to reduce the selling period in the (2020) by (16.7%) from the previous year (2019). Calculate the new inventory turnover.

(Suppose the other things are fixed)

Question 1 (Note this question is from the Week 5 Tutorial) Sandox Retail has the following unadjusted trial balance as at 30 June 2020 in the table: Accounts Debit ($) Credit ($) Cash 8,524 Accounts Receivable 7,000 Supplies 15,000 Prepaid Insurance 300 Insurance Expense 600 Equipment 27,000 Accumulated Depreciation 12,000 Other Assets 5,100 Wages Payable 1,500 Accounts Payable 7,500 Income Tax Payable 3,150 Share Capital (3000 shares outstanding all year) 16,000 Retained Profit 10,300 Sales Revenue 95,000 COGS 32,900 Wages Expense 18,000 Supplies Expense 25,680 Income Tax Expense 5,346 Total 145,450 145,450 3 Question 1 (Cont’d) Required: a) Prepare an Income Statement for Sandox Retail for the financial year 2019-2020. (2.5 marks) b) Prepare a Balance Sheet as of 30 June 2020. (2.5 marks) c) Prepare the closing journals for Sandox Retail.

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)