The Sax Company signs a lease agreement dated January 1, 2010 that provides for it to lease computers from the Appleton Company beginning January 1, 2010. The lease terms, provisions, and related events are as follows: The lease term is five years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers have an estimated life of five years, a fair value of $300,000, and a zero estimated residual value. Sax Company agrees to pay all executory costs. The lease contains no renewal or bargain purchase option. The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. The Sax Company…

The Timmer Company signs a lease agreement dated January 1, 2007 that provides for it to lease equipment from Landau Company beginning January 1, 2007. The lease terms, provisions, and related events are as follows: The lease is non-cancellable and has a term of five years. The annual rentals are $83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. The Timmer Company agrees to pay all executor costs at the end of each year. In 2007 these were: insurance $3,760; property taxes, $5,440. In 2008: insurance, $3,100; property taxes, $5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has an economic life of…

On January 1, 2014, Alison, Inc., paid $76,800 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $224,000 and liabilities of $104,000. A patent held by Holister having a $8,100 book value was actually worth $53,100. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2014, Holister earned income of $38,000 and declared and paid dividends of $13,000. In 2015, it had income of $61,700 and dividends of $18,000. During 2015, the fair value of Allison’s investment in Holister had risen from $86,200 to $92,280.   Assuming Alison uses the equity method, what balance should appear in the Investment in…

On January 1, 2017, Alison, Inc., paid $60,000 for a 40 percent interest in Holister Corporation's common stock. This investee had assets with a book value of $200,000 and liabilities of $75,000. A patent held by Holister having a $5,000 book value was actually worth $20,000. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $30,000 and declared and paid dividends of $10,000. In 2018, it had income of $50,000 and dividends of $15,000. During 2018, the fair value of Allison's investment in Holister had risen from $68,000 to $75,000. a.Assuming Alison uses the equity method, what balance should appear in the Investment in Holister…

FreshPak Corporation manufactures two types of cardboard boxes used in shipping canned food, fruit, and vegetables. The canned food box (type C) and the perishable food box (type P) have the following material and labor requirements. Type of Box C                P Direct material required per 100 boxes: Paperboard ($.20 per pound) ......................................................................................... 30 pounds     70 pounds Corrugating medium ($.10 per pound) ........................................................................... 20 pounds    30 pounds Direct labor required per 100 boxes ($12.00 per hour) ................................................. .25 hour            .50 hour The following manufacturing-overhead costs are anticipated for the next year. The predetermined overhead rate is based on a production volume of 495,000 units for each type of box. Manufacturing overhead is applied on the basis of direct-labor hours. Indirect material ............................................................................................................................................ $ 10,500 Indirect labor…

Information for management   Joe Murphy retired a few years ago at the age of 48, having built up a substantial retirement portfolio through a range of entrepreneurial activities. He moved to the Snowy Mountains to follow his dream of a peaceful mountain life. However, after a few months, Murphy became restless and opened a ski equipment store. This single store soon grew into a chain of four outlets spread from the Snowy Mountains to the Victorian Alps. As Murphy put it, ‘I can’t believe how fast we’ve expanded. It’s basically been uncontrolled growth—growth that has occurred in spite of what we’ve done’. Although business was profitable, the chain did have its share of problems. Sales tended to be seasonal, with…

Supernova Company had the following summarized balance sheet on December 31 of the current year: ​ Assets Accounts receivable $ 350,000 Inventory 450,000 Property and plant (net) 600,000 Total $1,400,000 ​ ​​ Liabilities and Equity Notes payable $ 600,000 Common stock, $5 par 300,000 Paid-in capital in excess of par 400,000 Retained earnings 100,000 Total $1,400,000 ​ The fair value of the inventory and property and plant is $600,000 and $850,000, respectively. ​ Assume that Redstar Corporation exchanges 75,000 of its $3 par value shares of common stock, when the fair price is $20 per share, for 100% of the common stock of Supernova Company. ​ Required: ​What journal entries will Redstar Corporation record for the investment in Supernova and issuance…

On January 1, 16, Brown Inc. acquired Larson Company's net assets in exchange for Brown's common stock with a par value of $100,000 and a fair value of $800,000. Brown also paid $10,000 in direct acquisition costs and $15,000 in stock issuance costs. On this date, Larson's condensed account balances showed the following:   Book Value Fair Value Current Assets $280,000 $370,000 Plant and Equipment 440,000 480,000 Accumulated Depreciation (100,000)   Intangibles – Patents 80,000 120,000 Current Liabilities (140,000) (140,000) Long-Term Debt (100,000) (110,000) Common Stock (200,000)   Other Paid-in Capital (120,000)   Retained Earnings (140,000)     Required: Record Brown's purchase of Larson Company's net assets.  

Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line would be set up in unused space in Shrieves’s main plant. The machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. The machinery has an economic life of 4 years, and Shrieves has obtained a special tax ruling that places the equipment in the MACRS 3-year class. The machinery is expected to have a salvage value of $25,000 after 4 years of use. The new line would generate incremental sales of 1,250 units…