Sims from all quizzes

docx

School

Henderson State University *

*We aren’t endorsed by this school

Course

3063

Subject

Finance

Date

Jan 9, 2024

Type

docx

Pages

Uploaded by LieutenantGalaxyKangaroo40

Answers below

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Scroll down to complete all parts of this task. Brotonne Inc. is a Delaware corporation in the business of manufacturing engravable metal pet identification collar tags, with multiple facilities located throughout the northeastern United States. Over the past five years, Brotonne Inc.'s profits have steadily declined as consumer preferences have shifted away from Brotonne's products in favor of Bluetooth smart pet-tag products. Management has begun initiatives to turn the company around, including restructuring operations and targeted cost reductions. As a result, Brotonne will be shutting down its facilities in Buffalo, N.Y., and Watertown, N.Y. At the company's fiscal year-end, 12/31/Y19, Brotonne's senior accountant must determine the impact of Brotonne's planned facility disposals on the company's financial statements (assume that no entries have yet been recorded for December Year 19). Management has determined that the shutdowns do not qualify as discontinued operations.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Using the exhibits, determine the amount of liabilities arising from exit costs that Brotonne should accrue at 12/31/Y19 related to each shutdown. In column C, enter the amount of the accrual associated with the item listed in column B for the facility shown in column A. Round answers to the nearest whole dollar. Enter amounts that increase the company's liabilities as positive numbers (credits). Enter amounts that decrease the company's liabilities as negative numbers (debits). If a value is zero, enter a zero (0). Assume any present value implications to be immaterial and that Brotonne will not, under its accounting policy, include a time-value adjustment for immaterial amounts at 12/31/Y19. Scroll down to complete all parts of this task. On January 1, Year 1, Stopaz Co. issued 8%, five-year bonds with a face value of $200,000. The bonds pay interest semiannually on June 30 and December 31 of each year. The bonds were issued when the market interest rate was 4% and the bond proceeds were $235,931. Stopaz uses the effective interest method for amortizing bond premiums/discounts and maintains separate general ledger accounts for each. For the situations below, record the appropriate journal entries. To prepare each required journal entry:  Click on a cell in the Account Name column and select the appropriate account. An account may be used once or not at all for a journal entry.  Enter the corresponding debit or credit amount in the associated column.  All amounts will be automatically rounded to the nearest dollar.  Not all rows in the table might be needed to complete each journal entry.  If no journal entry is needed, check the "No Entry Required" box at the top of the table as your response. Prepare the journal entry to record the issuance of the bonds on January 1, Year 1:

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Pop-up 1: [The lease must be treated as a finance lease due to the length of the lease term relative to the asset's economic life.] The lease term is for seven years, and the economic life of the asset is nine years; the lease represents 77 percent of the life of the asset, and since this exceeds the 75 percent threshold used to determine that the lease term represents the "major part" of the remaining economic life of the asset, the lease must be treated on Baker's books as a finance lease per GAAP. Had this criterion not been met, the lease still could have qualified for finance lease treatment if there was an ownership transfer at the end, a written purchase option, a net present value equal to or exceeding the asset's fair value, or specialization of an asset such that it would not have an expected alternative use to the lessor. Pop-up 2: [the finance lease will result in higher cash flows from operations in Year 1 by $10,655.] An operating lease will treat the entire payment as a cash outflow from operations. The ROU asset and lease liability will be booked initially at $92,414 (the present value of the minimum lease payments). The interest rate of 6.0 percent will be used, as it is the rate implicit in the lease. For a finance lease, the interest component in Year 1 ($92,414 × 6% = $5,545) will be a cash outflow from operations while the remainder of the payment ($16,200 – $5,545 = $10,655) will be a cash outflow from financing. Pop-up 3: [we will pay $4,905 in interest and $11,295 in principal.] The Year 1 payment of $16,200 will be allocated $5,545 to interest and $10,655 to principal. The $10,655 in principal will reduce the outstanding lease liability from $92,414 to $81,759. Interest of 6 percent on $81,759 will result in $4,905 in interest in Year 2, with the remaining $11,295 allocated to principal. Pop-up 4: [The annual amortization expense associated with the leased asset will be $13,202.] The ROU asset will be booked at $92,414 and because the lease is a finance lease due to meeting the 75

percent lease term versus economic life threshold, amortization will be booked over the life of the lease (7 years). $92,414 divided by 7 = $13,202 per year. Pop-up 5: [The bond was issued with an annual coupon rate of 4.75 percent and interest expense on the income statement will exceed interest payments.] Semiannual coupon payments of $11,875 on a face value of $500,000 equates to a semiannual interest rate of 2.375%; bonds are issued at annual rates and the annual rate would be 2.375% × 2 = 4.75%. Because the bond was issued at a discount and interest expense is based on market rates at the time of issuance, interest expense will exceed actual interest payments. The market rate at issuance was 5.5% (2.75% × 2). Pop-up 6: [lower at issuance, the initial carrying value of the bond would have been higher and amortization of the discount would be lower.] Lower market rates relative to the coupon rate would have resulted in a higher initial carrying value for the bond. With a smaller difference between the carrying value and face value, amortization (overall and annually) of the discount would have been lower. Pop-up 7: [the unamortized discount will get smaller each year until maturity.] As a bond gets closer to maturity, any unamortized discount would get smaller each period until it equals zero at maturity. Amortization of the discount will result in the credits to the Discount account, and because the per-period amortization gets larger each period (while interest paid stays the same), the differential between interest expense and interest paid will get larger each period. Bond payable will be booked initially at $500,000 and remain at that level until maturity. Pop-up 8: [the market value of the bond will decline.] Changes in market rates have no impact on the book value of bonds or interest expense. The market value will decline because higher interest rates in the marketplace will make a fixed coupon bond less attractive. Scroll down to complete all parts of this task. Lexin Corp. uses the par value method to account for its treasury stock transactions. The company is considering changing to the cost method, and would like to evaluate the differences between the two methods and the impact that the change would have on the equity section of the

company’s balance sheet. The following transactions occurred during the year: • At the beginning of the year, 25,000 shares of $5 par common stock were issued at $8 per share. • Several months later, Lexin repurchased 1,500 shares at $12 per share. • Before the end of the fiscal year, the company re-sold 500 shares at $10 per share and then another 500 shares at $15 per share. For the situations below, record the appropriate journal entries. To prepare each required journal entry:  Click on a cell in the Account Name column and select the appropriate account. An account may be used once, more than once, or not at all for a journal entry.  Enter the corresponding debit or credit amount in the associated column.  All amounts will be automatically rounded to the nearest dollar.  Not all rows in the table might be needed to complete each journal entry. 1. Provide the journal entries for the transactions above under the par value method. Note: Make separate journal entries for each of the two re-sell transactions. 2. Provide the journal entries for the transactions above under the cost method. Note: Make separate journal entries for each of the two re-sell transactions. 3. Fill in the values of the table below for the comparison of the equity section of the balance sheet under both methods. AB C 1 2 3 4 5 6 7 The journal entries using the par value method are shown below: Par Value Method Event Account Name Debit Credit Issuance Cash $200,000 Common Stock $125,000 APIC – C/S 75,000

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Buy Back Treasury Stock $7,500 APIC – C/S 4,500 Retained Earnings 6,000 Cash $18,000 Re-sell Cash $5,000 Treasury Stock $2,500 APIC – C/S 2,500 Cash 7,500 Treasury Stock 2,500 APIC – C/S 5,000 Issuance: 25,000 shares issued at $8 per share = cash of $200,000. 25,000 shares of common stock issued at $5 par per share = $125,000. APIC – C/S is the plug credit. Buy back: 1,500 shares re-purchased at $5 par each = $7,500 debit to treasury stock. APIC – C/S is debited for $4,500, which is 1,500 shares × the original APIC spread of $3 per share ($8 original issuance price - $5 par). Cash of $18,000 is needed to re-purchase 1,500 shares at $12 per share. A debit of $6,000 to retained earnings is the plug. Shares re-sold: There are two separate re-sales. The first is 500 shares at $10 per share, which = cash of $5,000. 500 shares are released from the treasury stock account, and at $5 par, this equals a credit of $2,500 to treasury stock. APIC – C/S of $2,500 is the plug. The second re-sale is for another 500 shares at $15 per share, which = cash of $7,500. This also releases 500 shares from the treasury stock account, or $2,500 in par value. APIC – C/S of $5,000 is the plug. 2. The journal entries using the cost method are shown below: Cost Method Event Account Name Debit Credit Issuance Cash $200,000 Common Stock $125,000 APIC – C/S 75,000 Buy Back Treasury Stock $18,000 Cash $18,000 Re-sell Cash $5,000 Retained Earnings 1,000

Treasury Stock $6,000 Cash 7,500 Treasury Stock 6,000 APIC – T/S 1,500 Issuance: 25,000 shares issued at $8 per share = cash of $200,000. 25,000 shares of common stock issued at $5 par per share = $125,000. APIC – C/S is the plug credit. Buy back: 1,500 shares re-purchased at $12 each = $18,000 debit to treasury stock. Cash of $18,000 is needed to re-purchase 1,500 shares at $12 per share. Shares re-sold: There are two separate re-sales. The first is 500 shares at $10 per share, which = cash of $5,000. 500 shares are released from the treasury stock account, and at the $12 original re-purchase price, this equals a credit of $6,000 to treasury stock. A debit to retained earnings of $1,000 is the plug. The second re-sale is for another 500 shares at $15 per share, which = cash of $7,500. This also releases 500 shares from the treasury stock account, or $6,000 in cost (based on the $12 re-purchase price). APIC – T/S of $1,500 is the plug. 3. The equity section of the balance sheet under both methods is shown below: Line Item Par Value Method Cost Method Common Stock 125,000 125,000 Treasury Stock (2,500) (6,000) APIC – C/S 78,000 75,000 APIC – T/S 0 1,500 Retained Earnings (6,000) (1,000) Total 194,500 194,500 These totals all come from the journal entries shown earlier in the answer explanations.

Apic-C/S 5000 (not Cash)

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Pop-up 1: [The lease must be treated as a finance lease due to the length of the lease term relative to the asset's economic life.]

The lease term is for seven years, and the economic life of the asset is nine years; the lease represents 77 percent of the life of the asset, and since this exceeds the 75 percent threshold used to determine that the lease term represents the "major part" of the remaining economic life of the asset, the lease must be treated on Baker's books as a finance lease per GAAP. Had this criterion not been met, the lease still could have qualified for finance lease treatment if there was an ownership transfer at the end, a written purchase option, a net present value equal to or exceeding the asset's fair value, or specialization of an asset such that it would not have an expected alternative use to the lessor. Pop-up 2: [the finance lease will result in higher cash flows from operations in Year 1 by $10,655.] An operating lease will treat the entire payment as a cash outflow from operations. The ROU asset and lease liability will be booked initially at $92,414 (the present value of the minimum lease payments). The interest rate of 6.0 percent will be used, as it is the rate implicit in the lease. For a finance lease, the interest component in Year 1 ($92,414 × 6% = $5,545) will be a cash outflow from operations while the remainder of the payment ($16,200 – $5,545 = $10,655) will be a cash outflow from financing. Pop-up 3: [we will pay $4,905 in interest and $11,295 in principal.] The Year 1 payment of $16,200 will be allocated $5,545 to interest and $10,655 to principal. The $10,655 in principal will reduce the outstanding lease liability from $92,414 to $81,759. Interest of 6 percent on $81,759 will result in $4,905 in interest in Year 2, with the remaining $11,295 allocated to principal. Pop-up 4: [The annual amortization expense associated with the leased asset will be $13,202.] The ROU asset will be booked at $92,414 and because the lease is a finance lease due to meeting the 75 percent lease term versus economic life threshold, amortization will be booked over the life of the lease (7 years). $92,414 divided by 7 = $13,202 per year. Pop-up 5: [The bond was issued with an annual coupon rate of 4.75 percent and interest expense on the income statement will exceed interest payments.] Semiannual coupon payments of $11,875 on a face value of $500,000 equates to a semiannual interest rate of 2.375%; bonds are issued at annual rates and the annual rate would be 2.375% × 2 = 4.75%. Because the bond was issued at a discount and interest expense is based on market rates at the time of issuance, interest expense will exceed actual interest payments. The market rate at issuance was 5.5%

(2.75% × 2). Pop-up 6: [lower at issuance, the initial carrying value of the bond would have been higher and amortization of the discount would be lower.] Lower market rates relative to the coupon rate would have resulted in a higher initial carrying value for the bond. With a smaller difference between the carrying value and face value, amortization (overall and annually) of the discount would have been lower. Pop-up 7: [the unamortized discount will get smaller each year until maturity.] As a bond gets closer to maturity, any unamortized discount would get smaller each period until it equals zero at maturity. Amortization of the discount will result in the credits to the Discount account, and because the per-period amortization gets larger each period (while interest paid stays the same), the differential between interest expense and interest paid will get larger each period. Bond payable will be booked initially at $500,000 and remain at that level until maturity. Pop-up 8: [the market value of the bond will decline.] Changes in market rates have no impact on the book value of bonds or interest expense. The market value will decline because higher interest rates in the marketplace will make a fixed coupon bond less attractive. Scroll down to complete all parts of this task. JIS Machinery Co. is reviewing accounting and disclosure requirements for its significant guarantees, commitments, and contingencies, including litigation as of December 31, Year 1. The financial statements are expected to be available to be issued February 14, Year 2. Use the information in the exhibits to determine the amount, if any, to recognize and whether disclosure is required in JIS's financial statements as of and for the year ended December 31, Year 1. Unless otherwise specified, assume that no amounts related to these guarantees, commitments, and contingencies, including litigation, have been recognized in the financial statements as of December 31, Year 1. For each of JIS's guarantees, commitments, and contingencies, including litigation, in the table below: • In column B, indicate whether an accrual is required for the situation by clicking in the

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

shaded cells and selecting a "yes" or "no" answer. • In column C, enter the amount of the accrual, if any. If no accrual is required, enter a zero (0). • In column D, indicate whether a disclosure is required by clicking in the shaded cells and selecting a "yes" or "no" answer.

Pop-Up 1: [The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.] This disclosure is intended to inform the users of the financial statements of inherent uncertainties in measuring amounts presented in the financial information and alerts users that uncertainties are present in the financial statements of all reporting entities. These disclosure requirements are governed by generally accepted accounting principles (GAAP), rather than by generally accepted auditing standards (GAAS). Additionally, the subsequent resolution of some matters could differ significantly from the resolution that is expected at the date of the financial reports. Work performed by the auditor should not be discussed or included in the financial statement footnotes. Pop-Up 2: [Under the guidance of ASC 606, revenue is recognized when a customer obtains control of promised goods or services.] Under the guidance of ASC 606, revenue resulting from sales with customers with contracts is properly recognized when the customer obtains control of promised goods and services. In some situations, as a matter of best practices or policy, the entity will qualify the customer as having the ability to pay for goods and services over the term of the contract, such as through the use of obtaining a new customer's credit rating or through the consideration of the entity's historical experience with receiving payments from an existing customer before entering into a new or renewed contract. However, the revenue recognition criteria under the standard does not require that the customer demonstrate an ability to pay for goods and services or that the company credit-qualify the customer (such as when revenue is capitalized). The standard also does not require the customer to have paid amounts payable through the term (end) of the contract, or in advance, to ensure collectability before the entity may recognize revenue. In the event of uncollectible amounts (for sales to customers with contracts or otherwise), the entity will record an estimate for bad debt (debit bad debt expense and credit the allowance for doubtful accounts) followed by the direct write-off the uncollectible amount for the customer (debit allowance for doubtful accounts and credit the customer's account receivable balance). However, the accrual for bad debt expense and recognition of the write-off of a customer's balance (or a portion of the balance) are accounting practices that are not addressed under revenue recognition criteria under the guidance. The standard does not address governmental specifically. The guidance in ASC 606 applies to not-for-profit entities. Pop-Up 3: [Therefore, merchant solutions agreements represent one performance obligation.] A performance obligation is a promise to transfer a good or service to a customer. The transfer can be either an individual good or service, a bundle of goods and services that are distinct, or a

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

series of goods and services that are substantially the same and are transferred in the same manner. Because the company has determined that merchant processing solutions consist of services that are substantially the same (authorization and processing of the merchants' electronic customer transactions) with the same pattern of transfer (settlement of merchant customer payments using the company's money transmittal licenses), the company's merchant solutions agreements represent one performance obligation. The company's customers (the merchants and merchant organizations) will pay for the company's services in accordance with the terms of the Merchant Solutions Agreement which, typically, will require payment as services are delivered in a contract for a series of similar services (i.e., the service delivered is the collective electronic payment approval, processing, and settlement activity) as they are needed by the customer. Pop-Up 4: [The three-tier fair value hierarchy includes quoted prices (level 1), observable inputs (level 2), and unobservable inputs (level 3).] The guidance established by GAAP has established a three-tier fair value hierarchy which includes quoted prices (level 1), observable inputs (level 2), and unobservable inputs (level 3). Management's estimates and CFO approval are not requirements under the guidance. There is also no threshold for applying the fair value hierarchy, such as applying them to assets and liabilities that exceed 20 percent of annual revenues. Pop-Up 5: [The Company includes in reported loss contingencies those contingencies the Company determines to be both probable and reasonably estimable in accordance with GAAP. Legal costs are expensed as incurred.] Loss contingencies are those the company determines to be both probable and reasonably estimable in accordance with generally accepted accounting principles (GAAP). Management's evaluation or judgment of whether a contingency is considered to be "fair" is not a requirement under GAAP. Loss contingencies that are reportable are reported regardless of the expected settlement date of the contingent loss. Legal costs are expensed as occurred (i.e., legal costs in connection with the ordinary conduct of business are not capitalized). Costs incurred in connection with disputes with customers are not separately accounted for from costs incurred in connection with noncustomer or other operational matters. Pop-Up 6: [The Company has classified five customers as major customers. The loss or combination of losses of any one or more of these five customers could have a significant impact on the Company's revenues and ability to meet its loan obligations.] Generally accepted accounting principles (GAAP) require financial statement disclosure of significant concentrations of revenue with one or more customers, known as major customers. Disclosure of major customers is required although the names of the company's customers should not be disclosed. Additionally, footnote disclosures do not report major customers (or that

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

there were none) for prior years and do not quantify a number of major customers whose loss is required to constitute the company's inability to meet loan obligations. Companies should determine major customers annually for disclosure. There is no requirement to perform such an analysis every three years. There is also no estimate, evaluation, or judgment of the potential loss of revenues from major customers as "less than material but estimable" or "material but non- estimable." Pop-Up 7: [On February 7, Year 6, the Company completed the sale of its subsidiary, ItsDone! LLC to Your Dollar Inc. for total consideration of $874,000, pursuant to the terms of a subsidiary sale and purchase agreement entered into that same day.] The company is required to reflect all reportable subsequent events as of the date of the report in the company's financials, or to disclose subsequent events when required by GAAP in the footnotes to the financial statements. Footnote disclosure is required when the sale of a subsidiary occurs after the date of the company's financials, but before the date the financial statements are issued. PayFast should disclose the sale of its subsidiary ItsDone! LLC, which occurred on February 7, Year 6. A potential sale of a subsidiary in Year 6 is not a reportable subsequent event as of the balance sheet date of Year 5 and should be disclosed. Therefore, PayFast Solutions will not disclose the planned sale of its subsidiary, GetPaidToday Solutions, in the Company's footnotes. Significant errors in the financial classification or amount of transactions that occurred as of the balance sheet date, but which were identified prior to issuance of the company's financial statements, are corrected in the financial statements (i.e., they are not disclosed in the footnotes). Scroll down to complete all parts of this task. Using the information included within the exhibits, answer each question in the tables below, which reflect both the bonus method and the goodwill method of accounting. Use whole numbers for all amounts (no decimals needed). The LRS Partnership officially began on March 14, Year 1. After several years of operating a successful partnership, one of the partners has negotiated a withdrawal from the partnership effective in July of Year 5. The remaining partners are weighing two options for accounting for the withdrawal: the bonus method and the goodwill method.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Scroll down to complete all parts of this task. Felbin Inc. is in the second quarter of its first year of operations, and it plans to use the allowance method to account for its receivables. The CFO of the company is evaluating two different approaches to the allowance method and the impact that each may have on the company's financial statements. The CFO estimates sales for the year will be $4.75 million, with $4.5 million on credit. The tax rate for Felbin is 30%. The CFO asks you to prepare an analysis of what the year-end journal entries might look like under the two different assumptions. Based on your analysis, the CFO will determine which one of the two independent approaches to take when recording bad debts expense at year-end. Using the CFO's estimate of sales and accounts receivable for the year and the information in the exhibits above, prepare the following proposed journal entries for the CFO to review. To prepare each required journal entry:  Click on a cell in the Account Name column and select the appropriate account. An account may be used once or not at all for a journal entry.  Enter the corresponding debit or credit amount in the associated column.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

 All amounts will be automatically rounded to the nearest dollar.  Not all rows in the table might be needed to complete each journal entry. 1. Assume the balance sheet approach is used. Assuming economic conditions worsen, provide the journal entry that would be made for the year: 2. Assume the aging method is used. What is the expected charge to bad debt expense under the assumption that economic conditions worsen? Scroll down to complete all parts of this task. During Year 1, Ember Corp. purchases 15 percent of Stanton Industries and pays legal fees of $35,000 for the acquisition. The investment in Stanton is classified as an equity security, as Ember does not exercise significant influence. Stanton provided the information in the exhibits regarding the company’s activities during Year 1. Ember adjusts the investment asset account for changes in the fair values of its equity securities. For the situations below, record the appropriate journal entries. To prepare each required journal entry:  Click on a cell in the Account Name column and select the appropriate account. An account may be used once or not at all for a journal entry.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

 Enter the corresponding debit or credit amount in the associated column.  All amounts will be automatically rounded to the nearest dollar.  Not all rows in the table might be needed to complete each journal entry. 1. Ember Corp.'s initial (acquisition) journal entry will be:

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version