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Elan Coil [88]
3 years ago
8

E21A­1. (Lessee Entries; Finance Lease with No Residual Value) (LO 1, 4) DU Journeys enters into an agreement with Traveler Inc.

to lease a car on December 31, 2016. The following information relates to this agreement. 1.The term of the non­cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term. 2.The fair value of the car was $15,000 at commencement of the lease. 3.Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2017. The first payment is to be of an amount of $5,552.82, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be $5,830.46 and the third and final payment will be $6,121.98). 4.DU Journeys' incremental borrowing rate is 8%. The rate implicit in the lease is unknown. 5.DU Journeys uses straight­line depreciation for all similar cars. Instructions (a) Prepare DU Journeys' journal entries for 2016, 2017, and 2018. (b) Assume, instead of a constant rate of increase, the annual lease payments will increase according to the Consumer Price Index (CPI). At its current level, the CPI stipulates that the first rental payment should be $5,820. What would be the impact on the journal entries made by DU Journeys at commencement of the lease, as well as for subsequent years?
Business
1 answer:
Nadusha1986 [10]3 years ago
5 0

Answer:

<u>(a) Prepare DU Journeys' journal entries for 2016, 2017, and 2018.</u>

Date            Account Title and Explanation    Debit($)     Credit($)

31/12/2016  Right of Use asset                          15,000

                   Lease Liability                                                    15,000

(to record lease of asset)

31/12/2017  Interest Expense                             1,200

                  Lease Liability                                 4,352.82

                  Cash                                                                    5,552.82

(to record interest expense and lease payment)

31/12/2017  Amortization Expense                     5,000

                  Right of use Asset                                               5,000

(to record amortization expense for right of use asset)

31/12/2018 Interest Expense                               851.77

                 Lease Liability                                   4,978.69

                 Cash                                                                      5,830.46

(to record interest expense and lease payment)

31/12/2018 Amortization Expense                      5,000

                 Right of use Asset                                                 5,000

(to record amortization expense for right of use asset)

Date: 31/12/2016

Annual Payment: -

Interest Expense: -

Reduction of Lease Liability: -

Lease Liability: $15,000

Depreciation Expense: -

Date: 31/12/2017

Annual Payment: $5,552.82

Interest Expense: $1,200

Reduction of Lease Liability: 4352.82

Lease Liability: 10647.18

Depreciation Expense: $5,000

Date: 31/12/2018

Annual Payment: $5,830.46

Interest Expense: 851.7744

Reduction of Lease Liability: 4978.6856

Lease Liability: -44331.5056

Depreciation Expense: $5,000

Date: 31/12/2019

Annual Payment: $6,121.98

Interest Expense: -3546.520448

Reduction of Lease Liability: - 44331.5056

Lease Liability: 0

Depreciation Expense: $5,000

(b) Consumer Price index means: book the same amount year to year for payment. The increase in CPI may be booked as an expense when incurred.

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Compound Interest:
MA_775_DIABLO [31]

Option answer:

d. Interest = $10.64 and New Balance = $360.64

Answer:

A = $360.64

A = P + I where

P (principal) = $350.00

I (interest) = $10.64

Calculation Steps:

First, convert R as a percent to r as a decimal

r = R/100

r = 1.5/100

r = 0.015 rate per year,

Then solve the equation for A

A = P(1 + r/n)nt

A = 350.00(1 + 0.015/4)(4)(2)

A = 350.00(1 + 0.00375)(8)

A = $360.64

Summary:

The total amount accrued, principal plus interest, with compound interest on a principal of $350.00 at a rate of 1.5% per year compounded 4 times per year over 2 years is $360.64.

7 0
2 years ago
Tercer reports the following for one of its products. Direct materials standard (4 lbs. $2 per lb.) Actual direct materials used
Natalka [10]

Answer:

Results are below.

Explanation:

Giving the following information:

Direct materials standard (4 lbs. $2 per lb.)= $8 per finished unit

Actual direct materials used (AQ)= 300,000

Actual finished units produced= 60,000

Actual cost of direct materials used= $535,000

<u>To calculate the direct material price and quantity variance, we need to use the following formulas:</u>

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (2 - 1.783)*300,000

Direct material price variance= $65,100 favorable

Actual price= 535,000 / 300,000= $1.783

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (4*60,000 - 300,000)*2

Direct material quantity variance= $120,000 unfavorable

6 0
3 years ago
Public relations is often meant to do what? (Select the best answer.)
Gennadij [26K]
I am 80% sure that the answer is c. (:
8 0
3 years ago
Ellen has entered all of her monthly expenses. She needs to create a formula that will deduct her monthly expenses from her mont
Phantasy [73]

Answer:

Absolute reference

Explanation:

An absolute reference in excel indicates a reference that is locked such that rows and columns do not alter when copied to another cell in the excel sheet.

It points to an actual fixed location in excel and absolute referencing is simply by adding a dollar  sign before the row and column.

In other words ,Ellen will absolutely reference her income ,as the income is the same month-on-month.

5 0
3 years ago
You are a U.S. investor who purchased British securities for 2,340 pounds one year ago when the British pound cost $1.52. No div
Olin [163]

Answer:

Total Return = 10.45%

Explanation:

To calculate the return, we must first determine the appreciation in the value of the securities in terms of the US dollar.

The initial investment in terms of US dollar was of,

Initial Investment in USD = Investment in Pounds * Exchange rate

Initial Investment in USD = 2340 * 1.52

Initial Investment in USD = $3556.8

The current value of the investment in terms of USD is,

Current value of investment in USD = 2440 * 1.61

Current value of investment in USD = $3928.4

The formula to calculate total return is,

Total Return = (Current Value - Initial Value) / Initial Value

So, the total return based on US dollars was:

Total return  = (3928.4 - 3556.8) / 3556.8

Total Return = 0.10447 or 10.447% rounded off to 10.45%

6 0
3 years ago
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