Chapter 5, Homework
- Dylan Corp leases some unused warehouse space to Carter Corp for $5k/month, payable in advance. On 8/01/2013 Dylan received $60k rent from Carter for the one year period 8/01/2013 – 7/31/2014. Required: Determine how much of this $60k rent received by Dylan on 8/01/13 should recognize in its:
income statement for the year ended 12/31/2013 as rent revenue, and
12/31/2013 balance sheet as unearned rent revenue?
- Clark Corp began operations on 1/01/14 and has a fiscal year end of 12/31. Clark rebuilds transmissions and provides a 12 month warranty on all its work. Clark estimates that warranty performance cost will be approximately 2% of revenue. During 2015, Clark rebuilds transmissions and charges customers a total of $600,000. Also during 2014, Clark performs warranty work and in doing so incurs costs totaling $5,600.
Determine the amount of warranty expense to appear in the year-end 12/31/14 income statement, and
Determine the amount of estimated warranty liability to appear in the 12/31/14 balance sheet.
- Assume that on 1/01/2014 Filbeck Corp issues 4 year bonds with a face value of $5 mil and a stated interest rate of 7% with interest payable annually on 12/31 and maturing on 12/31/2017.
Provide amortization tables similar to those in Exhibit 5.1 assuming that:
the market rate at issuance was 7%,
the market rate at issuance was 6%,
the market rate at issuance was 8%.
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