Accounting 305
Chapter 5, Homework
1. 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 â 7/31/2014. Required:
Determine how much of this $60k rent received by Dylan on 8/01/13
should recognize in its:
a) income statement for the year ended 12/31/2013 as rent revenue, and
b) 12/31/2013 balance sheet as unearned rent revenue?
2. 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.
Required:
a) Determine the amount of warranty expense to appear in the year-end
12/31/14 income statement, and
b) Determine the amount of estimated warranty liability to appear in the
12/31/14 balance sheet.
3. 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.
Required:
Provide amortization tables similar to those in Exhibit 5.1 assuming that:
a) the market rate at issuance was 7%,
b) the market rate at issuance was 6%,
c) the market rate at issuance was 8%.