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Accounting Exercises Assignment

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Question;1. On January 1, 2008, Burke Corporation signed a 5-year non- cancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2008. The machine has an estimated useful life of 6 years. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke?s incremental borrowing rate is 10%, and the Lessor?s implicit rate is unknown.Instructions(a) What type of lease is this? Explain.(b) Compute the present value of the minimum lease payments.(c) Prepare all necessary journal entries for Burke for this lease through January 1, 2009.(a) (b) (c) 1/1/08 12/31/08 1/1/09 2. On January 1, 2008, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease.1. The term of the non-cancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.2. Equal rental payments are due on January 1 of each year, beginning in 2008.3. The fair value of the equipment on January 1, 2008, is $150,000, and its cost is $120,000.4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis.5. Bensen set the annual rental to ensure an 11% rate of return. Flynn?s incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.Instructions(a) Discuss the nature of this lease to Bensen and Flynn.(b) Calculate the amount of the annual rental payment.(c) Prepare all the necessary journal entries for Flynn for 2008.(d) Prepare all the necessary journal entries for Bensen for 2008.(a) (b) (c) 1/1/08 12/31/08 (d) 1/1/08 12/31/08 3. On January 1, 2008, Doug Nelson Co. leased a building to Patrick Wise Inc. The relevant information related to the lease is as follows.1. The lease arrangement is for 10 years.2. The leased building cost $4,500,000 and was purchased for cash on January 1, 2008.3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years.4. Lease payments are $275,000 per year and are made at the end of the year.5. Property tax expense of $85,000 and insurance expense of $10,000 on the building were incurred by Nelson in the first year. Payment on these two items was made at the end of the year.6. Both the lessor and the lessee are on a calendar-year basis.Instructions(a) Prepare the journal entries that Nelson Co. should make in 2008.(b) Prepare the journal entries that Wise Inc. should make in 2008.(a) Entries for Doug Nelson are as follows:1/1/08 12/31/08 (b) Entries for Patrick Wise are as follows:12/31/08 4.The chief executive officer of Richards Corp. attended a conference in which one of the sessions was devoted to variable costing. The CEO was impressed by the presentation and has asked that the following data of Richards Corp. be used to prepare comparative statements using variable costing and the company's absorption costing. The data follow:Direct materials-$90,000Direct labor -120,000variable factory overhead-60,000fixed factory overhead-150,000Fixed marketing and administrative expense-180,000The factory produced 80,000 units during the period, and 70,000 units were sold for $700,000.1. Prepare an income statement using variable costing?2. Prepare an income statement using absorption costing. (Round unit costs to three decimal places.)?6. Roman Products Inc., has two divisions, Milan and Venice. For the month ended March 31, Milan had sales and variable costs of $500,000 and $225,000, respectively, and Venice had sales and variable costs of $800,000 and $475,000, respectively. Milan had direct fixed production and administrative expenses of $60,000 and $35,000, respectively, and Venice had direct fixed production and administrative expenses of $80,000 and $45,000, respectively. Fixed costs that were common to both divisions and couldn't be allocated to the divisions in any meaningful way were selling, $33,000, and administration, $27,000.Prepare a segmented income statement by division for March.7. A company has sales of $1,000,000, variable costs of $250,000, and fixed costs of $600,000. Compute the following:1. Contribution margin ratio.2. Break-even sales volume.3. Margin of safety ratio.4. Net operating income as a percentage of sales.8. Charlie Co. needs 20,000 units of a certain part to use in its production cycle. The following information is available:Cost to Charlie to make the part:Direct materials................................................ $ 4Direct labor.................................................... 16Variable factory overhead........................................ 12Fixed factory overhead applied..................................... 6Total.......................................................... $38Cost to buy the part from Delta Co.................................. $36If Charlie buys the part from Delta instead of making it, Charlie could not use the released facilities in another manufacturing activity. Eighty percent of the fixed factory overhead applied will continue regardless of what decision Charlie makes.1. In deciding whether to make or buy the part, what are the total relevant costs per unit to make the part?2. What decision should Charlie make?

 

Paper#40053 | Written in 18-Jul-2015

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