Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 13, Problem 7RQ
Create an example showing how residual income is calculated. What information is used in computing residual income that is not used in computing
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ACCOUNTING QUESTION
On January 1, 2025, XYZ Enterprises had the
following transactions:
1. The owner invested $50.000 in cash to
start the business.
2. Purchased office equipment for $12.000
on credit.
3. Paid $2,000 for January rent.
4. Provided services to a client and recived
$5,000 in cash.
5. Paid $3,000 to settle part of the office
equipment liability.
6. Received a utility bill for $600, to be paid
in February.
a) Record the journal entries for each of the
above transactions.
Carla Vista Leasing Company leases a new machine to Sandhill Corporation. The machine has a cost of $65,000 and fair value of
$94,500. Under the 3-year, non-cancelable contract, Sandhill will receive title to the machine at the end of the lease. The machine has
a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Carla Vista expects to earn an 8% return on its
investment, and this implicit rate is known by Sandhill. The annual rentals are payable on each December 31, beginning December 31,
2025.
Click here to view factor tables.
(b).
Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g.
5,275.)
Interest (8%) Revenue/
Rent Receipt/Payment
Reduction of Principal
Expense
Receivable/Liability
(c)
Prepare the journal entry at commencement of the…
Assume that IBM leased equipment that was carried at a cost of $97,000 to Crane Company. The term of the lease is 5 years beginning
December 31, 2024, with equal rental payments of $30,200 beginning December 31, 2024. The fair value of the equipment at
commencement of the lease is $128,040. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit
interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable.
Prepare IBM's December 31, 2024, journal entries at commencement of the lease. (List all debit entries before credit entries. Credit
account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round
final answers to O decimal places e.g. 5,275.)
Click here to view…
Chapter 13 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 13 - What is the managerial accountants primary...Ch. 13 - Define goal congruence, and explain why it is...Ch. 13 - Describe the managerial approach known as...Ch. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Create an example showing how residual income is...Ch. 13 - What is the chief disadvantage of ROI as an...Ch. 13 - Why is there typically a rise in ROI or residual...Ch. 13 - Define the term economic value added. How does it...
Ch. 13 - Distinguish between the following measures of...Ch. 13 - Why do some companies use gross book value instead...Ch. 13 - Explain why it is important in performance...Ch. 13 - How do organizations use pay for performance to...Ch. 13 - Describe an alternative to using ROI or residual...Ch. 13 - Prob. 16RQCh. 13 - Prob. 17RQCh. 13 - Discuss the importance of nonfinancial information...Ch. 13 - Identify and explain the managerial accountants...Ch. 13 - Describe four methods by which transfer prices may...Ch. 13 - Explain the significance of excess capacity in the...Ch. 13 - Why might income-tax laws affect the...Ch. 13 - Prob. 23RQCh. 13 - The following data pertain to Dakota Divisions...Ch. 13 - Refer to the preceding exercise. Requited:...Ch. 13 - Refer to the data for Exercise 1324. Assume that...Ch. 13 - Golden Gate Construction Associates, a real estate...Ch. 13 - Prob. 28ECh. 13 - Prob. 29ECh. 13 - Refer to Exhibit 133. Assume that you are a...Ch. 13 - Prob. 32ECh. 13 - Prob. 33ECh. 13 - Prob. 34ECh. 13 - Prob. 35ECh. 13 - Long Beach Pharmaceutical Company has two...Ch. 13 - Prob. 37PCh. 13 - Prob. 38PCh. 13 - Long Beach Pharmaceutical Company has two...Ch. 13 - Prob. 40PCh. 13 - Prob. 41PCh. 13 - Megatronics Corporation, a massive retailer of...Ch. 13 - Prob. 43PCh. 13 - Prob. 44PCh. 13 - Prob. 45PCh. 13 - Clearview Window Company manufactures windows for...Ch. 13 - Prob. 47PCh. 13 - Alpha Communications, Inc., which produces...Ch. 13 - Prob. 49PCh. 13 - Holiday Entertainment Corporation (HHC), a...Ch. 13 - InterGlobal Industries is a diversified...Ch. 13 - Prob. 52C
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- Mary Leasing Company signs an agreement on January 1, 2025, to lease equipment to Crane Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2025, is $60,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $18,633.17 to the lessor, beginning on January 1, 2025. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Crane uses the straight-line depreciation method for all equipment. Click here to view factor tables. Prepare all of the journal entries for the lessee for 2025 to record the lease agreement, the lease payments, and all expenses related to this lease.…arrow_forwardOn December 31, 2025, Sunland Corporation leased a plane from Bridgeport Company for a seven-year period expiring December 31, 2032. Equal annual payments of $456000 are due on December 31 of each year, beginning with December 31, 2025. The lease is properly classified as a finance lease on Sunland's books. The present value at December 31, 2025 of the eight lease payments over the lease term discounted at 9% is $2751026. Assuming the first payment is made on time, the amount that should be reported by Sunland Corporation as the lease liability on its December 31, 2025 balance sheet is $2295026. $2751026. $2501579. ○ $2542619.arrow_forwardBlossom Company leases a machine from Blue Corp. under an agreement that meets the criteria to be a finance lease for Blossom. The six-year lease requires payment of $180000 at the beginning of each year, which includes $26000 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 11%; the lessor's implicit rate is 9% and is known by the lessee. The present value of an annuity due of 1 for six years at 11% is 4.69590. The present value of an annuity due of 1 for six years at 9% is 4.88965. Blossom should record the leased asset at ○ $880137. $845262. $753006. ○ $723169.arrow_forward
- The basic difference between a direct-financing lease and a sales-type lease is the recognition of the profit on the sale. O allocation of initial direct costs by the lessor to periods benefited by the lease arrangements. amount of the depreciation recorded each year by the lessor. manner in which rental receipts are recorded as rental income.arrow_forwardWhich of the following describes the lease term test? ○ If the asset has an alternative use during the lease term, it is a finance lease. ○ If there is a bargain purchase option during the lease term, it is a finance lease. ○ If the lease term is 75% or more of the economic life, it is a finance lease. ○ If the lease term is 90% or more of the economic life, it is a finance lease.arrow_forward1. What type of leases does Best Buy[use? 2. What amount of operating leases were reported by Best Buy? 3. What is the financial line item in the balance sheet that reports the leases (operating /finance) at Best Buy? 4. What other important disclosure about leases did you find in the notes to financial statements at Best Buy?arrow_forward
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