give explanations, thank you The ABD Company began operations several years ago. The company purchased a building and,since only half of the space was needed for operations, the remaining space was rented toanother firm for rental revenue of PhP1,000,000 per year. The success of ABD Company'sproduct resulted in the company needing more space. The renter's lease will expire nextmonth and ABD will not renew the lease in order to use the space to expand operations andmeet demand.The company's product requires materials that cost PhP1,250 per unit. The company employsa production supervisor whose salary is PhP100,000 per month. Production line workersare paid PHP750 per hour to manufacture and assemble the product. The company rentsthe equipment needed to produce the product at a rental cost of PhP75,000 per month.Additional equipment will be needed as production expanded and the monthly rental chargefor this equipment will be PhP45,000 per month. The building is depreciation on thestraight-line basis at PhP450,000 per year.The company spends PHP2,000,000 per year to market the product. Shipping costs for each unitare PhP1,000 per unit.The company plans to liquidate several investments in order to expand production. Theseinvestments currently earn a return of PhP400,000 per year.Required:Complete the table below by placing an "x" under each heading that identifies the cost involved.The "x's" can be placed under more than one heading for a single cost, e.g. a cost mightbe a sunk cost, an overhead cost, and a product cost. An "x" can thus be placed under eachof these headings opposite the cost.MftgОppor-VariableFixedDirectDirectOverheadPeriodtunitySunkCostCostMaterialsLaborCostCostCostCostRental revenueMaterials costsProduction supervisorsalaryProduction line workers'wagesEquipment rentalBuilding depreciationMarketing costsShipping costsReturn on presentinvestments

Opportunity cost refers to the expenses an entity has forgone in order to choose a different…

Answered: pegan operations several years ago. The…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Several years ago Velvet Company purchased a small building adjacent to its manufacturing plant in order to have room for expansion when needed. Since the company had no immediate need for the extra space, the building was rented out to another company for rental revenue of $40,000 per year. The renter’s lease will expire next month, and rather than renewing the lease, Velvet Company has decided to use the building itself to manufacture a new product. Direct materials cost for the new product will total $40 per unit. It will be necessary to hire a supervisor to oversee production. Her salary will be $2,500 per month. Workers will be hired to manufacture the new product, with direct labor cost amounting to $18 per unit. Manufacturing operations will occupy all of the building space, so it will be necessary to rent space in a warehouse nearby in order to store finished units of product. The rental cost will be $1,000 per month. In addition, the company will need to rent equipment for use…
Max's Grill leases space from Venture Real Estate. The terms of the non-renewable, four-year lease require Max to pay $5,000/month of rent. Max remodels the building by installing new non-removable flooring (a leasehold improvement) at a cost of $100,000. The flooring has an estimated useful life of 10 years with no salvage value. Max utilizes straight-line depreciation. What depreciation expense should Max record for the flooring's first full year?
A company decided to lease a food truck to promote sales across the country. The truck cost $65,000 and the company signed an irrevocable five-year lease. The company is trying to determine how to account for this asset. Which Financial Accounting Standards Board (FASB) guideline should the company use to report the truck? Capitalize the lease only because its non-cancellable. Capitalize the leased asset only if the company also capitalizes installment purchases. Capitalize the lease because it is a fixed asset. Capitalize the lease because it is long-term.
Riley Co. purchased a parcel of land six years ago for $768,500. At that time, the firm invested $120,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $41,500 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $652,000. What value should be included in the initial cost of the warehouse project for the use of this land? O $858,500 O $642,000 O $888,500 O $0 O $652.000
Shelton Co. purchased a parcel of land six years ago for $870,500. At that time, the firm invested $142,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $52,500 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $922,000. What value should be included in the initial cost of the warehouse project for the use of this land? Multiple Choice $870,500 $922,000 $1,064,000 $0 $1,012,500
Shelton Co. purchased a parcel of land six years ago for $869, 500. At that time, the firm invested $141,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $52,000 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $921,000. What value should be included in the initial cost of the warehouse project for the use of this land? Group of answer choices $1,062,000 $ 921,000 $0 $869, 500 $1,010, 500
ProWasher’s lawyer, Anna Turney, informed you that ProWasher has a legal obligation to dismantle and remove the equipment used to produce the dishwashers and clean up the rental premises as part of the lease agreement. The equipment, costing $10 million, was put into production on June 1, 2023 and has a useful life of 120 months. The dismantling and removal costs are estimated to be $3 million. What is the accountant supposed to do?
Shelton Company purchased a parcel of land six years ago for $869,500. At that time, the firm invested $141,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $52,000 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $921,000. What value should be included in the initial cost of the warehouse project for the use of this land? Multiple Choice A. $1,010,500 B. $869,500 C. $1,062,000 D. $921,000 E. SO
Morgan Company has recently bought all the trade, assets and liabilities of Hogan Corporation. As part of the take over, all of the combined business’s activities have been relocated at Morgan’s main site. As a result Hogan’s premises are now empty. However, just before the acquisition Hogan had signed a 3-year lease for their premises at P6,000 per month. At December 31, 2020 this lease had 32 months left to run and the landlord had refused to terminate the lease. A sub-tenant had taken over part of the premises for the rest of the lease at a rent of P2,500 per month. What amount of provision on the above onerous contract should Hogan recognize in the December 31, 2020 financial statements?
American Movieplex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million for seats and carpeting. The question being discussed over breakfast on Wednesday morning was the length of the depreciation period for these leasehold improvements. The company controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant. Keene: Why 25 years? We’ve never depreciated leasehold improvements for such a long period. Person: I noticed that in my review of the back records. But during our expansion to the Midwest, we don’t need expenses to be any higher than necessary. Keene: But isn’t that a pretty rosy estimate of these assets’ actual life? Trade publications shows an average depreciation period of 12 years How would increasing the depreciation period affect American Movieplex’s earnings? Does revising the estimate pose an ethical dilemma? Who would be affected if Person’s…
Chesterfield Constructions Ltd owns a crane which is used based on contract for many construction projects. The entity purchased the crane in April 2015 at a cost of $2,200,000. The manager estimates that the crane will work on average for 250 days each year for 10 years and then it would be sold at an estimated residual price of $200,000. By 30 June 2020 the crane had worked for 1,200 days.In July 2020 the motor of the crane started to shudder and lose power. An assessment of the crane’s motor resulted in repairs that were required to maintain the motor at its normal efficiency. The cost of $6,000 comprised labour of $4,000 and replacement parts of $2,000. The repairs were completed by the end of July 2020. The management decided that the cost would be regarded as a capital cost. At the same time management estimated that the crane would now be used for a total of 3,000 days with an estimated residual value of $90,000. In the remainder of the financial year to 2021 the crane worked…
Deliveries Ltd leased a truck from a truck dealer, City Vans Ltd. City Vans plc acquired the truck at a cost of $196,000.The truck will be painted with Deliveries Ltd’s logo and advertising and the cost of repainting the truck to make it suitable for another owner four years later is estimated to be $56,000. Deliveries Ltd plans to keep the truck after the lease but has not made any commitment to the lessor to purchase it. The terms of the lease are as follows: Date of entering lease: 1 July 2019.Duration of lease: 4 years.Life of leased asset: 5 years, after which it will have no residual value. Lease payments: $116,000 at the end of each year.Interest rate implicit in the lease: 10 per cent.Unguaranteed residual: $66,000.Fair value of truck at inception of the lease: $412,786 Required: (a) Demonstrate that the interest rate implicit in the lease is 10 per cent. (b) Prepare the journal entries to account for the lease transaction in the books of the lessor, City Vans Ltd, at 1 July…

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