1. Assume that on December 31, 2018, Stora Enso (FIN) signs a 10-year, non-cancellable lease agreement to lease a storage building from Sheffield Storage. The following information pertains to this lease agreement.
1. The agreement requires equal rental payments of €71,830 beginning on December 31, 2018.
2. The fair value of the building on December 31, 2018, is €525,176.
3. The building has an estimated economic life of 12 years, a guaranteed residual value of €10,000, and an expected residual value of €7,000. Stora Enso depreciates similar buildings using the straight-line method.
4. The lease is non-renewable. At the termination of the lease, the building reverts to the lessor.
5. Stora Enso’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Stora Enso.
Instructions
a. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2018, 2019, and 2020. Stora Enso’s fiscal year-end is December 31.
b. Suppose the same facts as above, except that Stora Enso incurred legal fees resulting from the execution of the lease of €5,000, and received a lease incentive from Sheffield to enter the lease of €1,000. How would the initial measurement of the lease liability and right-of-use asset be affected under this situation?
c. Suppose that in addition to the €71,830 annual rental payments, Stora Enso is also required to pay €5,000 for insurance costs each year on the building directly to the lessor, Sheffield Storage. How would this executory cost affect the initial measurement of the lease liability and right-of-use asset?
d. Return to the original facts in the problem. Now suppose that, at the end of the lease term, Stora Enso took good care of the asset and Sheffield agrees that the fair value of the asset is actually €10,000. Record the entry for Stora Enso at the end of the lease to return control of the storage building to Sheffield (assuming the accrual of interest on the lease liability has already been made).
Captain Marvelous, Inc. (Lessor) enters into a 12-year lease of equipment with Lessee, receiving annual lease payments of $700,217, payable at the beginning of each year. Lessee provides a residual value guarantee of $800,000. The lease does not transfer ownership of the underlying asset to Lessee or contain an option for Lessee to purchase the underlying asset. Lessor concludes that it is probable it will collect the lease payments and any amount necessary to satisfy the residual value guarantee provided by Lessee. At the commencement date, the equipment has: - Fair value: $8,005,000 - Carrying amount: $5,600,000 - Amount lessor expects to derive from the equipment at the end of the 12 years: $,1800,000 - Estimated remaining economic life: 15 years Lessor incurs $35,000 in initial direct costs in connection with obtaining the lease, and no amounts are prepaid by Lessee to Lessor. NOTE: At the end of the 12-Year lease, the equipment was sold for $1,950,000. Use the Sample Presentation to answer the following Topic 2 questions: 1. i) Prepare a schedule showing lease cash flow and residual values present value calculations with implicit discount rate of lease transaction. 2. ii) Show how you determine lease classification. 3. iii) Determine Net Investment in Lease. Show calculations. 4. iv) Calculate selling profit/(loss) of lease transaction. 5. v) Explain treatment of initial direct cost. 6. vi) Prepare journal entries at lease commencement date. 7. vii) Prepare a schedule of net investment activities for the lease term. 8. viii) Prepare journal entries at the end of year 1 9. ix) Prepare journal entries at the end of year 2. Prepare partial Balance Sheet and Income Statement for year ended in the second year. 10. x) Prepare journal entries at the end of the lease and sale of equipment.
On 1 July 2019, Freeway Fjord Ltd entered into an agreement with Normal Ltd under which Normal Ltd would lease a Fjord Festival motor vehicle supplied by Freeway Fjord Ltd. Freeway Fjord Ltd is a retailer of brand-new Fjord motor vehicles and its list price of a new Fjord Festival is $40,000 “drive away” on 1 July 2019. The cost of a brand new Fjord Festival to Freeway Fjord Ltd is $30,000.
The terms of the lease demand that Normal Ltd make an up-front payment of $1,103 on 1 July 2019 followed by five annual payments of $10.000 with the first of $10,000 instalments falling due on 30 June 2020.
The lease contains punitive termination clauses that render it non-cancellable and the lease agreement stipulates that legal title in the Fjord Festival will transfer to Normal Ltd when it has made the last lease payment (due on 30 June 2024).
Normal Ltd anticipates that on 30 June 2024, the Fjord Festival will have a residual value of zero and will have no remaining useful life.
The lease has an implicit interest rate of 9% per annum.
Accounting is the language of business, and it is not a dead language! The FASB is responsible for ensuring that all relevant and material financial information is properly codified in Generally Accepted Accounting Principles (GAAP).
The use of off-balance sheet leases to distort the real liabilities of companies is a topic of long-lived concern. ASU 2016-02, Leases, is the most recent action of FASB to address this issue.
For this assignment you will select a company of your choice or use one (1) of the companies you researched in your weekly discussions to write a six to eight (6-8) page report in which you:
- Summarize the impact of ASU 2016-02, Leases on the recording of leases.
- Discuss at least three (3) elements featured in the current information reported by your chosen company for its leases.
- Analyze the impact of the new standard on the reporting of your chosen company’s leases.
- Compare and contrast the impact that ASU 2016-02, Leases will have on the financial ratios of your chosen company.
- Determine the impact of the changes to accounting for leases on the recommendations of stock analysts for your chosen company.
- Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other websites do not qualify as academic resources.
I want full answer
28. One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. (page 8 #28)
A) True
B) False
Explain
Use the following to answer Questions 10–11.
Dorian Company produces and sells a single product. The product sells for $60 per unit and has a contribution margin ratio of 40%. The company' s monthly fixed expenses are $28,800. (page3 #10)
10. The variable expense per unit is
A) $31.20.
B) $24.00.
C) $36.00.
D) $28.80. explain the choice of answer
In this week’s discussion, you will discuss the ways contribution margin is used to determine the impact of changes in sales on income. As an accountant for a business that is interested in sales and income (in other words, every business) you may be called upon to analyze this information.
Please respond to all of the following prompts in the class discussion section of your online course:
Describe a scenario in which a business would utilize a contribution margin income statement. Why would they use one? What would it tell them? How does a change in sales impact the contribution margin? Net income? If you were preparing a contribution margin statement, would you prepare it per unit or as a ratio? Why would you choose one over the other?
A company wants to maximize profits for two products: Green (earning $10 profit per unit) and Blue (earning $14 profit per unit). Machine A Machine B Green 3 3 Blue Total Available 2 120 1 90 To produce these items, the company uses time on Machines A and B and is limited to the total time each day as shown at the right Additionally, the company must produce no less than 20 units TOTAL (if Green and Blue combined) each day to satisfy break even requirements and it cannot produce any more than 50 units of the Blue version each day. 5 Which constraint(s) (if any) is our binding? (1 pt.) 6. Which constraint(s) (if any) is/are redundant? (1 pt.) 7. How much slack or surplus do the constraints have (if any)? (2 pts)
More often than not, process improvement takes place whether or not a process is reengineered.
True
False
Pick a news story that is an example or an emphasises on Human Resources as Low-cost businesses may attempt to minimize staffing expenses, training & development, and even salaries.
Problem is it is often necessary to pay “market wages” for quality people, so HR strategies may differ little if any between low-cost and differentiated businesses. When employees are viewed as expenses, organizations tend to minimize their costs. When they are viewed as investments, organizations tend to maximize their value. Human capital is the sum of the capabilities of individuals in an organization, and is a source of competitive advantage. According to the knowledge management perspective, people and their skills and abilities represent the only resource that cannot readily be reproduced by a firm’s competitors.
News story must be from a credible source within the last 4 years with appropriate citation.
Responses which are purely opinion and anecdotal are not considered to be substantive in nature.
Two external sources to support information required in addition to the news story from a credible source.
Original news story from an external source plus two additional external sources required.
500 words