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Spoiled Baby Corp (SPC) sells baby buggies

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Question;Part 1: 10%;The company went to the bank to;borrow $500,000. You are required to negotiate the best deal. The Board of Directors has asked for you to;justify your position.;Part 2: 40%;Recent changes in the law require;SPC to warranty its products for 90 days and you have set up the required;accounts. Use the data provided to make;the appropriate journal entries.;Part 3: 50%;The company began an equipment;replacement project and you were required to determine the Book Value of its;fixed assets and make decisions regarding the purchase, trades, and disposition;of various assets during the year. Use;the data provided to record the transactions AND justify your decision.Part 1:Spoiled Baby Corp sells baby buggies and has decided to expand its operations. It needs to borrow $500,000 for 18 months and has sent you to negotiate with the bank.The bank is more than willing to lend the money to the company and is offering the company a discounted note at 6%.Mr. Moneybags, the banker, has indicated that this is quite a deal and non-discounted notes are currently being charged 6.2% APRAs the company accountant you must provide the necessary information to support your recommendation to the Board of Directors.Part 2;Spoiled Baby Corp (SPC) sells;baby buggies. Recent changes in the law;required SPC to warranty its products for 90 days and you must set up the;required accounts. Historical Data;indicates that 6% of monthly sales result in warranty claims. The June 20x1 monthly sales are $481,000.;The following warranty;claims were made against June sales.;July 8 210 July 14 450;July 16 900 July 21 385;July 26 421 July 28 772;Aug 4 1,795 Aug 8 921;Aug 14 267 Aug 17 1,022;Aug 25 186 Aug 27 755;Aug 29 548 Aug 30 899;Sept 2 111 Sept 3 219;Sept 5 1,135 Sept 14 816;Sept 18 242 Sept 24 987;Sept 27 147 Sept 28 1,587;Sept 29 788 Sept 30 489;Oct 1 1188 Oct 8 1387;Oct 14 489 Oct 17 577;Oct 21 1,967 Oct 27 927;Oct 28 683 Oct 29 492;Oct 30 897 Oct 31 1572;Prepare the Journal entries required to create and close the warranty period.Part 3;Spoiled Baby Corp sells;baby buggies and has begun an equipment replacement project. You are required to determine the Book Value;of each of its fixed assets and make decisions regarding the purchases, trades;and disposition of various assets.;Indicate your recommendation and justify your position;for each of the following events.;SPC purchased a tube extruder on April 3, 2007;for $27,000. It has a useful life of 10;years and a residual value of $4,000.;SPC used double declining balance depreciation for this asset. On February 19, 2012 SPC has an offer to sell;this unit for 8,000. 1. SPC purchased a;winding machine on July 28, 2012 for $21,000.;It has a useful life of 6 years or 12,000 hours. It has a residual value of $3,000. SPC is unsure whether to use straight line;depreciation or units of production. It;anticipates using the equipment approximately 3000 hours each year.;2. SPC purchased a;funneling machine on February 9, 2009 for $72,000. It has a useful life of 5 years and a residual;value of $12,000. SPC has used Straight;line depreciation for this equipment.;SPC has determined that this equipment no longer meets its needs and has;decided to exchange this unit for a new model.;The new Model has a MSRP of $100,000.;On December 28, 2012 SPC will exchange its equipment for the new Model;and pay $77,000.;3. SPC has a fully;piece of equipment that is currently fully depreciated on its books. This equipment is no longer used and SPC;wants to get rid of it. The cost of the;equipment is $10,000. The company has been offered $300 for its;parts. What is the journal entry that would record this transaction?

 

Paper#40044 | Written in 18-Jul-2015

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