**Problem Context**On June 1, Year 1, Charley Horse Company entered into a contract with Good Feed Company to purchase 1,000 bales of organic hay on January 30, Year 2, at a price of $30 per bale. The hay was intended to feed Charley Horse’s herd of bison. However, on December 1, Year 1, Charley Horse sold its herd, resulting in no need for the hay. The company is unable to sell the hay to a third party but can cancel the contract with Good Feed for a cancellation fee of $20,000.**Required Task**Determine the accounting entries, if any, Charley Horse Company should record on December 31, Year 1, concerning the contract for hay purchase scheduled on January 30, Year 2.

The given question relates to IAS 37 for recognizing provision for cancellation of contract. As per…

Answered: On June 1, Year 1, Charley Horse…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Auto Clinic is a wholly owned subsidiary of Fast-Check Equipment Company. Fast-Check Equipment sells and leases 4-wheel alignment machines. The usual selling price of each machine is $35,000; it has a cost to Fast- Check Equipment of $25,000. On January 1, 2015, Fast-Check Equipment leased such a machine to Auto Clinic. The lease provided for payments of $9,096 at the start of each year for five years. The payments include $1,000 per year for maintenance to be provided by the seller. There is a bargain purchase price of $2,000 at the end of the fifth year. The implicit interest rate in the lease is 10% per year. The equipment is being depreciated over eight years.The amortization schedule for the lease prepared by Fast-Check Equipment is as attached:Prepare the eliminations and adjustments, in entry form, that would be required on a consolidated worksheet prepared on December 31, 2015.
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Sandhill Corporation, a manufacturer of ethnic foods, contracted in 2020 to purchase 560 pounds of a spice mixture at $2.80 per pound, delivery to be made in spring of 2021. By 12/31/20, the price per pound of the spice mixture had risen to $3.09 per pound. In 2020, Sandhill should recognize No gain or loss. a gain of $162.40. a loss of $1568.00. a loss of $162.40.
Jelly Co. processes jam and sells it to the public. Jelly leases equipment used in its production processes from Squishy, Inc. This year, Jelly leases a new piece of equipment from Squishy. The lease term is 5 years and requires equal rental payments of $15,000 at the beginning of each year. In addition, there is a renewal option to allow Jelly to keep the equipment one extra year for a payment at the end of the fifth year of $10,000 (which Jelly is reasonably certain it will exercise). The equipment has a fair value at the commencement of the lease of $76,024 and an estimated useful life of 7 years. Squishy set the annual rental to earn a rate of return of 5%, and this fact is known to Jelly. The lease does not transfer title, does not contain a bargain purchase option, and the equipment is not of a specialized nature. Which of the 5 lease tests does the lease qualify as a finance lease for? Choose all that apply. Transfer of Ownership Test [Select ] Bargain Purchase Option Test […
Pearl Windows manufactures and sells custom storm windows for three-season porches. Pearl also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Pearl enters into the following contract on July 1, 2017, with a local homeowner. The customer purchases windows for a price of $2,420 and chooses Pearl to do the installation. Pearl charges the same price for the windows irrespective of whether it does the installation or not. The installation service is estimated to have a standalone selling price of $600. The customer pays Pearl $1,960 (which equals the standalone selling price of the windows, which have a cost of $1,120) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2017, Pearl completes installation on October 15, 2017, and the customer pays the balance due. Prepare the journal entries for Pearl in 2017.
Furtastic manufactures imitation fur garments. On June 1, 2024, Furtastic made a sale to Willett's Department Store under terms that require Willett to pay $220,000 to Furtastic on June 30, 2024. In a separate transaction on June 15, 2024, Furtastic purchased brand advertising services from Willett for $26,000. The fair value of those advertising services is $12,000. Furtastic expects that 3% of all sales will prove uncollectible. Required: 1. Prepare the journal entry to record Furtastic's sale on June 1, 2024. 2. Prepare the journal entry to record Furtastic's purchase of advertising services from Willett on June 15, 2024. Assume all of the advertising services are delivered on June 15, 2024. 3. Prepare the journal entry to record Furtastic's receipt of $220,000 from Willett on June 30, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet
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Sydney, Inc., a manufacturer of chocolate-coated mint candy acquired a patent on June 25, 2018, for 720,000. Management expects that the patent will be useful to the company for its remaining useful life of 10 years. On January 10, 2020, the company spent 120,000 in successfully defending the patent against a competitor. In 2021, management determines that the estimated remaining life of the patent should be reduced to only five years, including the current year. The company’s policy is to amortize the cost of Intangible assets using the straight-line method to the nearest month.What is the amortization expense for the year 2021? A. 72,000 B. 108,000 C. 129,000 D. 126,000
An entity cultivates cattle for the beef industry. On December 31, 2020 the entity's herds included 500, 18-month-old cattle. On December 2016 the quoted price for live cattle delivered to the local slaughterhouse to which the entity delivers its livestock is P 300 per 18-month-old animal. The slaughterhouse is located 25 miles from the entity's farmland where the cattle are raised. Carriers providing cattle transport services to the entity charge P65 per trip from the entity's farm to the slaughterhouse using a 10-cow carrier. No incremental selling costs arise on the sale to the slaughterhouse. On December 31, 2020 the fair value less costs to sell of the herd of cattle (biological assets) is a. P 117.500 b. P 119,935 c. P146,750 d. 150,000
Joy's House of Cheese (stocks Cougar Cheese) purchases a tract of land and an existing building for $940,000. The company plans to remove the old building and construct a new building on the site in a few months. In addition to the purchase price, Joy's pays closing costs, including title insurance of $2,400. The company also pays $12,800 in property taxes, which includes $8,400 of back taxes (unpaid taxes from previous years) paid by Joy's on behalf of the seller and $4,400 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor $47,000 to tear down the old building and remove it from the site. Joy is able to sell salvaged materials from the old building for $3,800 and pays an additional $10,400 to level the land to make it ready for use. Required: Determine the amount Joy's should record as the cost of the land. (Amounts to be deducted should be indicated by a minus sign.) Total cost of the land $

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