Section 7: Leases (14%) On 1/1/2012, Gerrit, Inc. enters int…

Section 7: Leases (14%) On 1/1/2012, Gerrit, Inc. enters into a 12-year non-cancellable lease for a piece of machinery owned by Verlander, Inc.  The lease calls for annual payments of $20,000, payable at the end of each year of the lease (i.e. first payment is due on 12/31/12).  At the end of the lease, the right to use the machine transfers back to Verlander.  Gerrit, Inc. declined the opportunity to purchase the machine outright for $250,000, and the economic life of the machine is believed to be 20 years.  There is also a bargain renewal option to extend the lease another 4 years for $10,000 per year.  Gerrit uses a 4% discount rate to calculate present values, and generally uses straight-line depreciation for machinery assuming no salvage value.  In addition, Gerrit Inc spends $51,000 to customize the machinery for use in their factory.  They believe that this customization has a useful life of 15 years.      Question 15) What type of lease is this, from Gerrit’s perspective, and why?      Question 16) What (if any) journal entries should Gerrit record on 1/1/2012?         Question 17) What (if any) journal entries should Gerrit record on 12/31/2013 (the end of year 2)?     Question 18) Could this lease qualify for sale and leaseback accounting treatment, if it had been sold to Verlander by Gerrit immediately before entering into the lease described above?  

Section 5: Ch 1 – Equity Investment (14%): Jason, Inc. purch…

Section 5: Ch 1 – Equity Investment (14%): Jason, Inc. purchases 40% of Travis, Inc. for $500,000 on 1/1/2018.  At the time of the purchase Travis, Inc. had a book value of $1,100,000.  The discrepancy in the fair value relative to the book value is primarily due to a building that has a fair value that is $80,000 greater than its book value (10-year remaining useful life) and a machine that has a fair value that is $70,000 greater than its book value (5-year remaining useful life).  Given the following information for 2018 and 2019:   Travis, Inc.: 2018: Ending FV = $1,400,000; NI = $600,000; Div. Paid = $90,000 2019: Ending FV = $800,000; NI (loss) = – $150,000; Div. Paid = $25,000   Jason, Inc.: 2018: Ending FV = $15,000,000; NI = $850,000; Div. Paid = $250,000 2019: Ending FV = $16,000,000; NI = $1,000,000; Div. Paid = $400,000 Question 9)What is the value of the “Equity Investment in Travis, Inc.” on Jason’s 2018 and 2019 balance sheet?     Question 10)How much total “Investee Income” did Jason, Inc. record from this investment in 2018 and 2019?     Question 11)If Travis has a fair value at the end of 2026 of $1,200,000, reports net income in 2026 of $280,000, and pays a dividend of $60,000, how much “Investee Income” would Jason, Inc. record from this investment in 2026?

Section 1: Chapter 7 – (required, 20%) MMG Global features 4…

Section 1: Chapter 7 – (required, 20%) MMG Global features 4 departments: Travel Trade Media (TTM), Tourism Marketing Services (TMS), Human Resources (HR), and Accounting.  HR & Accounting are support departments, while TTM and TMS are operating departments.  Number of personnel per department provides a reasonable allocation basis for HR, while accounting is allocated based on accountant hours used by each department.  Budgeted costs and basis-usage is reported below:   Accounting HR TMS TTM budgeted costs        2,000,000        1,500,000   20,000,000   12,000,000 # of personnel                    20                    40               140               100 accounting hours used               5,000               5,000          18,000          12,000     Please allocate MMG’s total costs to the 4 departments, using: Question 1) The direct method Question 2) The step down method, removing Accounting first   Question 3) What 2 formulas would be used in the reciprocal method?