Answer:
Annual demand 50,000 units
Holding cost $0.25 per year
Ordering Cost $500 per order
EOQ : 14,142
Number of orders per year 4
Average inventory 14,142 units
Maximum inventory 14,500 units
Reorder level 410 units
Length of order cycle 3 days
Annual Holding cost $12,500
Annual ordering cost $2000
Annual affected inventory cost $14,500
Explanation:
EOQ = [tex]\sqrt{\frac{2 * D * S}{H} }[/tex]
EOQ = [tex]\sqrt{\frac{2 * 50000 * 500}{0.25} }[/tex]
EOQ = 14,142 units
Number of Order : Annual demand / EOQ
Number of order : 50,000 / 14,142 = 3.53 or approximately 4
Annual Ordering cost : No. of order * cost per order
Annual ordering cost : 4 * $500 = $2,000
Annual Holding Cost : Demand * Holding cost per unit
Annual holding cost = 50,000 * $0.25 per unit = $12,500
Reorder level : Daily demand * lead time
Reorder level : [ 50000 / 365 ] * 3 = 410 units
Maxim Corp. has provided the following information about one of its products:Date Transaction Number of Units Cost per Unit1/1 Beginning Inventory 285 $ 157 6/5 Purchase 485 $ 177 11/10 Purchase 185 $ 217 During the year, Maxim sold 570 units.What is cost of goods sold using the average cost method? (Do not round intermediate computations.)
Answer:
$101,904.6
Explanation:
The computation of the cost of goods sold using the average cost method is shown below:
Beginnig Inventory 285 at $157 = $44,745
Purchases 485 at $177 = $85,845
Purchases 185 at $217 = $40,145
Total cost = $170,735
Now
Total number of units is
= 285 + 485 + 185
= 955
Now
Average Cost per unit is
= $170,735 ÷ 955
=$ 178.78
And, finally
Cost of goods Sold is
= 570 × $178.78
= $101,904.6
Amazon Corporation owns machinery with a book value of $760,000. It is estimated that the machinery will generate future cash flows of $700,000. The machinery has a fair value of $560,000. Amazon should recognize a loss on impairment of:_______.
Answer: $200,000
Explanation:
The loss on impairment refers to the difference between the carrying or book value of an asset and the fair/ recoverable value of same.
Loss on impairment = Book value - Fair value
= 760,000 - 560,000
= $200,000
The value of the machinery would fall by $200,000 to tally it to its fair value.
Bob the accountant needs to record indirect labor utilized of $6,000 in a journal entry. Bob should:_____.
a. debit Manufacturing Overhead, $6,000; credit Wages Payable, $6.000.
b. debit Accounts Payable, $6,000; credit Manufacturing Overhead, $6,000.
c. debit Manufacturing Overhead, $6,000; credit Accounts Payable, $6,000.
d. debit Wages Payable, $6,000; credit Manufacturing Overhead, $6,000.
Answer:
c. debit Manufacturing Overhead, $6,000; credit Accounts Payable, $6,000
Explanation:
The journal to record indirect labor utilized of $6,000 will include a Debit to an Expense Account - Manufacturing Overhead and a Credit to Liability Account - Accounts Payable at the value of $6,000.
The firm you manage faces the following costs: Quantity Total Cost 0 $4 1 $6 2 $7 3 $10 4 $15 5 $21 What is the average fixed cost of the 2nd unit produced
Answer:
The average fixed cost of the 2nd unit produced is:
= $2.
Explanation:
a) Data and Calculations:
Quantity Total Cost Fixed Cost Average Fixed Cost
0 $4 $4 $4
1 $6 $4 $4
2 $7 $4 $2
3 $10 $4 $1.3
4 $15 $4 $1
5 $21 $4 $0.8
b) The average fixed cost (AFC) is the total fixed cost divided by the quantity of production within the relevant range. It does not change when there a change in the number of goods and services produced by a company. Average fixed cost can be calculated from the salaries of permanent employees, the mortgage payment on machinery and plant, and rent.
The text defines management as “The art of getting things done through the efforts of other people.” Put yourself in the shoes of a manager and explain what this definition means in the context of a company operation. You can use the example of any company (large or small) and any good or service.
The correct answer to this open question is the following.
Although you did not attach the text, we can comment on the quote.
"The art of getting things done through the efforts of other people.”
This quote means that good managers motivate and positively influence employees to get the job done. Managers coordinate and monitor the work of the employees. Managers first plan, then establish the goals to be accomplished and then direct the work effort to be productive.
If I were a manager of a company, I definitely try to emulate what the quote says. For instance, the manager of a recreational and sports club. I would do everything to establish clear, specific, and attainable goals so my employees could understand them. Then I describe the role and responsibilities of each employee so they can do their job without any doubts. And of course, I would delegate so they can do their jobs happily. No unnescesary intromissions. The objective would be to offer the best service possible to our clients.
Logan owns a horse ranch. Logan dislikes horses, but he opened the ranch because he heard it was a lucrative business and he wanted to make money. Logan’s horse ranch has lost money every year for the past 5 years (including this year), but Logan has made some changes to business operations, including hiring a consultant and increasing his prices. Logan anticipates that as a result of these changes, his horse ranch will generate a profit in the next year or two. This year, Logan hired his brother, Luke, to work at the horse ranch. Logan pays Luke $500/hr to clean the horse stalls. Logan also hired his best friend, Lucy, to do Logan’s grocery shopping and other personal errands. He pays Lucy $15/hr. Which of the following is most accurate?
a. Logan cannot deduct any of the costs associated with the horse ranch because the horse ranch would be classified as a hobby, not a business
b. Logan can deduct the full salary paid to Luke because Luke works in Logan’s horse ranch business
c. Logan can deduct the full salary paid to Lucy because the amount of the expense is reasonable
d. Logan can deduct the full salary paid to Lucy because grocery shopping is ordinary and necessary
e. None of the above are correct
Answer:
Logan Horse Ranch
The most accurate is:
e. None of the above are correct
Explanation:
Logan's payment to his brother, Luke, of $500 per hour, is not a reasonable business expense that can be deductible. Surely, $500 per hour is not a going rate for cleaning the horse stalls per hour. With Lucy doing grocery shopping for Logan, it does not resonate like an ordinary and necessary expense for the business. Therefore, options A to D are not correct. This leaves only option E as the most accurate.
The following selected transactions apply to Topeca Supply for November and December Year 1. November was the first month of operations. Sales tax is collected at the time of sale but is not paid to the state sales tax agency until the following month.
a. Cash sales for November Year 1 were $65,500 plus sales tax of 9 percent.
b. Topeca Supply paid the November sales tax to the state agency on December 10, Year 1.
c. Cash sales for December Year 1 were $79,500 plus sales tax of 9 percent.
Required:
Record the effect of the given transactions in a horizontal statements model.
Answer:
Note: See attached excel file for the record of the effect of the given transactions in a horizontal statements model.
In the attached excel file, we have:
Assets = Liabilities + Stockholders' Equity = $152,155
Explanation:
In the attached excel file, we have:
Sales tax payable on sales for November Year 1 = $65,500 * 9% = $5,895
Sales tax payable on sales for December Year 1 = $79,500 * 9% = $7,155
Assets = $152,155
Liabilities + Stockholders' Equity = $7,155 + $145,000 = $152,155
Therefore, the accounting equation is proved as follows:
Assets = Liabilities + Stockholders' Equity = $152,155
Suppose that a bank has $80 in checkable deposits, reserves of $15 , and a reserve requirement of 10%. Also assume that the the bank suffers a $6 deposit outflow. If the bank chooses to borrow from the Fed to meet its reserve requirement, then the bank would need to borrow $nothing . (Round your response to the nearest two decimal place.)
Answer: See explanation
Explanation:
Based on the information given in the question, the amount of borrowing that's required will be:
= [ rr * ( D - O)] - (R-O)
where,
rr = reserve requirement = 10% = 0.1
D = checkable deposits = $80
R = reserves = $15
O = deposits outflow = $6
= [ 0.10 × ($80 - $6)] - ($15 - $6)
= [ 0.10 × $74 ] - $9
= $7.4 - $9
= -$1.60
As a manager, Alejandro views his organization primarily as people and believes strongly in treating team members well to help them succeed. Which of the following orientations best describes Alejandro's leader orientation?
a. Symbolic orientation.
b. Human Resource orientation.
c. Structural orientation
d. Political orientation.
Answer:
b. Human Resource orientation.
Explanation:
It is correct to state that the orientation that most describes Alejandro's leader orientation is human resources, as the issue provides us with the information that Alejandro has an organizational vision based mainly on people and on the good direction of employees to help them succeed.
The orientation of human resources is related to the company's philosophy that will guide the behavior of employees and the organizational culture in accordance with the organizational mission and values. When a leader has this type of orientation focused on people, he encourages this behavior and so there is the dissemination of practices that value interpersonal relationships and collaboration, which can bring several benefits to an organization, such as increasing the value of work, greater innovation and productivity.
Jason Ford, the CEO of the Green-Plus Company, was known among businesspeople for his qualities of self-discipline, friendliness, caring, courage, compassion, trust, and humility. This example shows that a _______ is a character trait valued as being good.
Answer: virtue
Explanation:
Virtue is refered to as the behavior whereby one shows high moral standards. It is the quality posseses by someone when the person is morally good.
Since Jason Ford has qualities such as self-discipline, caring, trust, friendliness, courage, compassion, and humility, then virtue can be said to. Be valued as being good.
The provision of accounting information for internal users is known as
Answer:
managerial accounting
Explanation:
Jefferson Company's demand for its only product exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units.
Actual run time this week 5,696 minutes
Machine time available per week 6,400 minutes
Actual run rate this week 1.68 units per minute
Ideal run rate 2.00units per minute
Defect-free output this week 12,670 units
Total output this week (including defects) 18,100units
Required:
1. Compute the utilization rate. (Round your answer to 2 decimal places.)
2. Compute the efficiency rate. (Round your answer to 2 decimal places.)
3. Compute the quality rate. (Round your answer to 2 decimal places.)
4. Compute the overall equipment effectiveness (OEE). (Do not round intermediate calculations. Round your final answer to 3 decimal places.)
Answer:
1. Utilization rate = Operating time/Scheduled time
Utilization rate = 5,696/6,400
Utilization rate = 0.89
2. Efficiency rate = (Total output / Ideal run rate) / Operating time
Efficiency rate = (18,100/2) / 5,696
Efficiency rate = 9,050 / 5,696
Efficiency rate = 1.5888343
Efficiency rate = 1.59
3. Quality rate = Good units produced / Total units produced
Quality rate = 12,670 / 18,100
Quality rate = 0.70
4. Overall Equipment Effectiveness = Utilization rate * Efficiency rate * Quality rate
Overall Equipment Effectiveness = 0.89 * 1.59 * 0.70
Overall Equipment Effectiveness = 0.99057
Overall Equipment Effectiveness = 0.991
The utilization rate is 0.89 and the efficiency rate is 1.59.
From the information given, the utilization rate will be:
= Operating time/Scheduled time
= 5,696/6,400
= 0.89
The efficiency rate will be:
= (Total output / Ideal run rate) / Operating time
= (18,100/2) / 5,696
= 9,050 / 5,696
= 1.59
The quality rate will be:
= Good units produced / Total unit
= 12,670 / 18,100
= 0.70
The overall equipment effectiveness will be:
= Utilization rate × Efficiency rate × Quality rate
= 0.89 × 1.59 × 0.70
= 0.991
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Jill has recently begun working at a local florist. In addition to creating floral arrangements, Jill spends a good deal of her time talking to customers and ringing up sales. Over time, she identifies a weakness in the procedures for ringing up voids. No approval is neces- sary to void a sale, and the void slip collects very little information about the sale. After Jill has completed a sale and the customer has left, she voids the sale and pockets the cash that was just received. The floral shop doesn’t miss the lost inventory because it has a high inventory turnover ratio and high losses due to flowers losing their bloom.
1. What type of fraud is Jill committing?
2. What could the florist do to prevent this type of fraud from occurring?
Answer: See explanation
Explanation:
1. What type of fraud is Jill committing?
The fraud that Jill is committing is known as theft of cash through fraudulent disbursements. In this case, Jill is using a register disbursement scheme which involves false voids of customer sales. During the time of sale, a record is made and another record is then created again which is used for the false void.
2. What could the florist do to prevent this type of fraud from occurring?
To prevent this fraud, a receipt should be attached and the florist should make sure that every vital information about all sales are collected such as customers name, time, amount of goods bought, signature and f customers etc
Segway focuses on the personal people-mover market of individuals who need to move longer distances with ease. Its stand-up scooter is used in two narrow markets: tourist tours and warehouse employee movement. What type of marketing strategy should this company use
Answer:
The correct answer is "Differentiated marketing".
Explanation:
A marketing approach involving the promotion of a manufacturer portfolio which transfers from one sector of the economy would be known as Differentiated marketing.That alone contributes to better awareness, to a greater audience, towards consumer requirements including more revenues.Thus the above is the correct answer.
At the start of the current year, Minuteman Corporation had a credit balance in the Allowance for Doubtful Accounts of $1,800. During the year a monthly provision of 2% of sales was made for uncollectible accounts. Sales for the year were $600,000, and $5,600 of accounts receivable were written off as worthless. No recoveries of accounts previously written off were made during the year. What is the ending normal balance of t
Answer:
$8,200
Explanation:
Missing word "What is the ending normal balance of the Allowance account at year-end?"
Particulars Amount
Opening balance $1,800
Add: Monthly provision $12,000 (2%*$600,000)
Less: Bad debt $5,600
Ending balance of allowance $8,200
Lumberton Home Maintenance Company (LHMC) earned operating income of $6,000,000 on operating assets of $62,500,000 during Year 2. The Tree Cutting Division earned $1,000,000 on operating assets of $10,000,000. LHMC has offered the Tree Cutting Division $1,250,000 of additional operating assets. The manager of the Tree Cutting Division believes he could use the additional assets to generate operating income amounting to $112,500. LHMC has a desired return on investment (ROI) of 8 percent.
Required
a. Calculate the return on investment for LHMC, the Tree Cutting Division, and the additional investment opportunity.
b. Calculate the residual income for LHMC, the Tree Cutting Division, and the additional investment opportunity
Answer:
Lumberton Home Maintenance Company (LHMC)
LHMC Tree Cutting Additional
Division Investment
a. Return on Investment 9.6% 10% 9%
b. Residual income $1,000,000 $200,000 $12,500
Explanation:
a) Data and Calculations:
LHMC Tree Cutting Additional
Division Investment
Operating income $6,000,000 $1,000,000 $112,500
Operating assets $62,500,000 $10,000,000 $1,250,000
a. Return on Investment 9.6% 10% 9%
b. Residual income $1,000,000 $200,000 $12,500
Return on investment = Operating income/Operating assets * 100
Residual income = Operating income Minus (Desired ROI * Operating assets)
Desired Return on Investment (ROI) = 8%
illings and collections between an Enterprise Fund and the General Fund A city uses an Enterprise Fund to provide electricity to its citizens and to its General Fund. A total of $50,000 was billed to the General Fund and collected 30 days later. Prepare the journal entries necessary to record these transactions, and label the fund(s) used. Note: Under the Fund column, select the appropriate fund in which the transaction is recorded (GF: General Fund or ISF: Internal Service Fund).
Answer:
Enterprise Fund due from General Fund (Dr.) $50,000
Revenue from service (Cr.) $50,000
Explanation:
The enterprise fund is used to provide electricity to the citizens. The revenue will be recorded as service charges for providing the electricity. Enterprise fund will be due from General fund which is billed for $50,000.
Which of the following statements about a partnership is correct? Group of answer choices The personal assets of a partner are included in the partnership accounting records. A partnership is not required to file an information tax return. Each partner's share of income is taxable to the partnership. A partnership represents an accounting entity for financial reporting purposes.
Answer:
do you have a picture I can help you
XYZ shop has a favorite model that has annual sales of 145. The cost to place an order to replenish inventory is $25 per order, and annual inventory holding cost per unit is $20. Assume the store is open 350 days per year. a. What is the optimal order size
Answer:
EOQ= 19 units
Explanation:
Giving the following information:
Demand= 145 units
Order cost= $25 per order
Holding cost= $20.
To calculate the optimal order quantity, we need to use the economic order quantity method:
Economic order quantity (EOQ)= √[(2*D*S)/H]
D= Demand in units
S= Order cost
H= Holding cost
EOQ= √[(2*145*25) / 20]
EOQ= √362.5
EOQ= 19 units
From June 2008 oil was at a high of $144.78 per barrel. During the period from April 2011 until July of 2014, the price of oil hovered between about $115.32 per barrel and about $105.22 a barrel. Then, starting in August 2014 oil began a precipitous fall in price from the $105.22 to $33.62 a barrel in January 2016. Although the U.S. has great amounts of oil that can be brought out of the ground by “fracking,” by the beginning of 2016 many of the workers in the U.S. oil exploration and drilling industry were out of work and tremendous amounts of oil exploration equipment was sitting in the equivalent of “used car lots” to be sold.
Answer:
The explanation of the subject is described in the following part of the discussion.
Explanation:
The idea which should generally be used in this instance seems to be that individuals are generally motivated by motivations and take advantage of chances to improve. Because when a group continues operating, several tasks have been needed to do operate effectively. This should lead to labor revenue.Whenever companies identify an expense as well as a speedier way to accomplish operations, they will most surely go to it. The above leaves the job to be done as well as no machinery to operate and even if the device does not operate, these same commodities are not being usedDuring its 2019 fiscal year, a city receives a grant from the state to use on a worthy city project as determined by the city council. No other eligibility requirements exist, but the state requires that the grant proceeds not be spent before the city's 2020 fiscal year. The city council decides to hire a police officer who is to educate young people about the dangers of using illegal drugs. The grant is for $75,000. The state pays the city $75,000 for the grant during its 2019 fiscal year. How should the city report the receipt of the grant proceeds from the state in its Special Revenue Fund?
Answer:
Dr Cash $75,000
Cr Deferred inflows of resources--grant $75,000
Explanation:
Based on the information given we were told that The GRANT is for the amount of $75,000 in which the The state pays the city the amount of $75,000 for the GRANT during its 2019 fiscal year. Therefore the city should report the RECEIPT OF THE GRANT PROCEEDS from the state in its Special Revenue Fund as:
Dr Cash $75,000
Cr Deferred inflows of resources--grant $75,000
(To record receipt of the grant proceeds)
Beth owns a corporate office park in Ohio. Her ownership rights include the right to sell or give away the property without restriction, as well as the right to commit waste, if she chooses. Beth's ownership interest is:
Answer:
Fee Simple Absolute
Explanation:
The 6 types of modern freehold estates, distinguished by duration includes;
1. Fee simple absolute
2. Life estate
3. Fee tail
4. Fee simple determinable
5. Fee simple subject to a condition subsequent
6. Fee simple subject to an executory limitation
And also
The types of Fee Simple includes
A) Fee Simple Absolute
B) Defeasible Fees
Fee Simple Absolute
This is regarded as an absolute ownership. It is a never ending period of time with no hindrance or limitations on its inheritability. it also cannot be ended or shuffled on the happening of any event. It is also regarded as the right to possess now, even until the end of time.
Its characteristics includes:
1. The holder has all the rights or entitlement.
2. The duration is never ending that is, the interest is absolute because the interest will not end on the occurrence of an event or condition
3. There is no future interest that follows it
3. The owner has the right of possession, alienation, and exclusion
And others.
A company has 1000000 shares outstanding trading at $15 a piece. Managers believe that the discount rate appropriate for the risk borne is 15% and total cash flows, expected to be $1 million next year, will rise by 5% per year indefinitely. Discuss a strategy that is beneficial to the current shareholders.
Answer:
Explanation:
Knowing the value of the equity and establishing the intrinsic worth of the share may help you develop a perfect strategy that will benefit the current shareholders.
Value of the equity = Cashflow÷(discount rate - growth rate)
= $1,000,000 ÷ (15%-5%)
= $1,000,000 ÷ (10%)
= $10,000,000
Intrinsic value per share = Value of the equity ÷ Shares outstanding
= $10,000,000 ÷ 1,000,000
= $10
For the share, The intrinsic value = $10
However, since the current trading share price is $15, then we can posit that the share price is over-valued.
As a result, the perfect strategy that will be beneficial to the shareholders is for the current shareholders to sell the shares (short selling at a high price and purchasing at a low price).
Assume that Parker Company will receive SF100,000 in 360 days. Assume the following interest rates: U.S. Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% Assume the forward rate of the Swiss franc is $1.0455 and the spot rate of the Swiss franc is $1.0037. If Parker Company uses a Money Market Hedge, it will receive _____in 360 days.
Answer:
$99,414
Explanation:
Calculation to determine how much he will receive If Parker Company uses a Money Market Hedge,
First step is to determine the amount borrowed
Borrowed=(SF100,000/1.05)
Borrowed= SF95,238
Second step is convert SF95,238 to dollar
SF 95,238*$1.0037
=$95,590.38
Now let determine the amount to receive
Amount received=$95,590.38*1.04
Amount received=$99,414
Therefore If Parker Company uses a Money Market Hedge, it will receive $99,414 in 360 days.
A company using IFRS to prepare its financial statements will use a hierarchy to determine what recognition, valuation, and disclosure requirements should be used.
1. IFRS, IAS, IFRS Interpretations
2. Pronouncements of other standard-setting bodies
3. The Conceptual Framework for Financial Reporting
Which of the following depicts the correct order of the hierarchy?
a. 2,3,1
b. 3,2,1
c. 1.2.3
d. 1,3,2
Answer:
The hierarchy for determining recognition, valuation, and disclosure requirements for IFRS is:
d. 1,3,2
Explanation:
1. IFRS, IAS, IFRS Interpretations are the main standards issued by the IASB, the international accounting standard-setting body. It is like the FASB that sets the US GAAP.
2. Pronouncements of other standard-setting bodies can be applied where IFRS are not definitive.
3. The Conceptual Framework for Financial Reporting help the IASB to develop and revise IFRS that are based on consistent concepts.
Analysts estimate that a bond has a 40 percent probability of being priced at $950 and a 60 percent probability of being priced at $1,050 one year from today. The bond is also callable at any time at $1,010. What is the expected value of this bond in one year?
A) $1,000
B) $980
C) $1,010
D) $995
E) $986
Answer:
E) $986
Explanation:
The computation of the expected value of the bond in one year is shown below;
= (Probability × Price of bond) + (Probability × Callable price bond)
= (0.4 × $950) + (0.60 × $1,010)
= $986
Hence, the expected value of the bond in one year is $986
Therefore the correct option is E.
The May transactions of Bramble Corp. were as follows:
May 4 Paid $610 due for supplies previously purchased on account.
7 Performed advisory services on account for $6,840.
8 Purchased supplies for $870 on account.
9 Purchased equipment for $1,930 in cash.
17 Paid employees $700 in cash.
22 Received bill for equipment repairs of $800.
29 Paid $1,280 for 12 months of insurance policy. Coverage begins June 1.
Required:
Journalize the transactions.
Answer and Explanation:
The journal entries are given below:
On May 4
Account payable $610
To cash $610
(To record the cash paid)
On May 7
Account receivable $6,840
To service revenue $6,840
(To record the service on account)
On May 8
Supplies $870
To Account payable $870
(To record supplies purchased on account)
On May 9
Equipment $1,930
To cash $1,930
(To record the equipment purchase)
On May 17
Salary expense $700
To cash $700
(To record the salaries expense)
On May 22
Repair expense $800
To Account payable $800
(To record the received bill for repairing of an equipment)
On May 29
Prepaid rent $1,280
To cash $1,280
(To record the cash paid)
Big Corporation receives management consulting services from its 95 percent owned subsidiary, Small Inc. For the year 20X8, Small billed Big $140,000. Small's labor cost and other associated costs for the employees providing services to Big totaled $121,000 in 20X8. Big reported $2,567,000 of income from its own separate operations for 20X8, and Small reported net income of $695,000.
Based on the preceding information, what amount of consolidated net income should be reported in 20X8?
a. $3,262,000
b. $4,050,000
c. $3,254,100
d. $3,122,000
Answer: a. $3,262,000
Explanation:
Consolidated income is simply the income that both companies got from their separate operations for the year because Small Inc is a subsidiary of Big Corporation so both incomes have to be added to find the total company income:
= 2,567,000 + 695,000
= $3,262,000
If a company purchases equipment costing $5,100 on credit, the effect on the accounting equation would be:
Answer:
assets increase $5,100 and liabilities increase $5,100
Explanation:
Assets are the items that a company owns which can provide future economic benefit.
Liabilities are future sacrifices of economic benefits that an entity is obliged to make to other entities as a result of past transactions or other past events, hence Liabilities are what a person or company owe other parties.
If a company purchases equipment costing $5,100 on credit, the assets of the company will increase by $5100 as a result of acquiring an equipment. Also, the liability will increase by $5100 as a result of debt owed.
BBB Leasing purchased a machine for $280,000 and leased it to Jack Tupp Auto Repair on January 1, 2021. Lease description: Quarterly rental payments $16,427 at beginning of each period Lease term 5 years (20 quarters) No residual value; no BPO Economic life of machine 5 years Implicit interest rate 7% Fair value of asset $280,000 What is the balance in the lease payable account after the April 1, 2021, lease payment
Answer: $251758.53
Explanation:
Based on the information given in the question,
Total lease liability = $280,000
Then, the balance in the lease payable account when the first lease payment takes place on January 1, 2021 will be:
= $280,000 - $16,427
= $263573
The, the interest that is included in the lease payment that's made on April 1, 2021 Will be:
= $263573 x 7% x 1/4
= $4612.53
Then, the principal amount that's included in the lease payment made on April 1, 2021 will be:
= $16,427 - $4612.53
= $11814.47
Therefore, the balance in the lease payable account after the April 1, 2021, lease payment will be:
= $263573 - $11814.47
= $251758.53
