Acc 423 Week 5 Wileyplus Assignment - Exercises Essay

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ACC 423 Week 5 WileyPlus Assignment - Exercises
Business - Accounting

ACC423 P13-9 P20-4 E21-7 P22-6

P13-9 (Premium Entries and Financial Statement Presentation) Sycamore Candy Company offers a CD single as a premium for every five candy bar wrappers presented by customers together with
$2.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each CD to the company is $2.25; in addition it costs 50 cents to mail each CD. The results of the premium plan for the years 2010 and 2011 are as follows. (All purchases and sales are for cash.)
2010 2011
CDs
…show more content…
E21-7 (Lessee-Lessor Entries, Sales-Type Lease) On January 1, 2011, Palmer Company leased equipment to Woods Corporation. The following information pertains to this lease.
1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.
2. Equal rental payments are due on January 1 of each year, beginning in 2011.
3. The fair value of the equipment on January 1, 2011, is $200,000, and its cost is $150,000.
4. The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,000.
Woods depreciates all of its equipment on a straight-line basis.
5. Palmer sets the annual rental to ensure an 11% rate of return. Woods’s incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.
6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.

Instructions
(Both the lessor and the lessee’s accounting period ends on December 31.)
(a) Discuss the nature of this lease to Palmer and Woods.
(b) Calculate the amount of the annual rental payment.
(c) Prepare all the necessary journal entries for Woods for 2011.
(d) Prepare all the necessary journal entries for Palmer for 2011.

P22-6 (Accounting Change and Error Analysis) On December 31, 2010,

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