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Eduardwww [97]
4 years ago
7

On January 1, 2021, Sauder Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for S

auder to make annual payments of $200,000 at the beginning of each year for five years beginning on January 1, 2021 with the title passing to Sauder at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Sauder uses the straight-line method of depreciation for all of its fixed assets. Sauder accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $833,972 at an effective interest rate of 10%.
In 2022, Sauder should record interest expense of:

a. $43,397.
b. $49,737.
c. $69,737.
d. $63,397.
Business
1 answer:
Minchanka [31]4 years ago
6 0

Answer:

d. $63397

Explanation:

Principal outstanding after first payment at beginning of Jan 1 2021 =

833972 -200000 (does not include interest as first payment made at beginning)

=  633972

interest expense = 633972 *.10 = $ 63397.20

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standard rate = $189,400 / 1,000 = $189.40 per unit

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actual production = 1,120 units

actual rate = $197,200 / 1,120 = $176.07 per unit

  1. total fixed overhead variance = actual overhead costs - budgeted overhead costs =  $197,200 - $189,400 = $7,800 unfavorable. The actual overhead expense was higher than the budgeted.
  2. controllable variance = (actual rate - standard rate) x actual units = ($176.07 - $189.40) x 1,120 units = -$14,929.60 favorable. The actual overhead rate was lower than the standard rate, that is why the variance is positive.
  3. volume variance = (standard activity - actual activity) x standard rate = (1,000 - 1,120) x $189.40 = -1,120 x $189.40 = -$212,128 favorable. More units where produced than budgeted, that is why the variance is positive.

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If income increases from $20,000 to $30,000 and $9,000 of the new income is spent on consumption, then the MPC is ___________..
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The propensity to consume refers to how the level of consumption changes with  an increase in income. As with other concepts of this nature, it is necessary to   analyse the propensity to consume in terms of Marginal Propensity to Consume(MPC).

MPC=change in consumption/change in income

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