14 ABG bought a patent for €6,145. The patent is legally protected for a period of 10 years during which it is expected to generate a net cash flow of €1,000 per year. ABG has agreed with KLM to sell the patent at the beginning of the 8th year at its fair value. How will the amount of €6,145 be recognised and how will it be treated after initial recognition (the market interest rate is 10%)?What would differentiate your answer if ABG purchased the patent for (a) €7,000, (b) €5,000?
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14 ABG bought a patent for €6,145. The patent is legally protected for a period of 10 years during which it is expected to generate a net cash flow of €1,000 per year. ABG has agreed with KLM to sell the patent at the beginning of the 8th year at its fair value. How will the amount of €6,145 be recognised and how will it be treated after initial recognition (the market interest rate is 10%)?
What would differentiate your answer if ABG purchased the patent for (a) €7,000, (b) €5,000?
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- 9. Cray Research sold a super computer to the Max Planck Institute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $1.10/€ and the foreign exchange advisor for Cray Research predicts that the spot rate is likely to be $1.05/€ in six months. (a) What is the expected gain/loss from the forward hedging? (b) If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Why or why not? (c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Why or why not? (d) Suppose now that the future spot exchange rate is forecast to be $1.17/€. Would you recommend hedging? Why or why not?On 28 February 2015 Makhafola Ltd leased a building located in Pretoria CBD to Thato Ltd for a period of 35 years. ThatoLtd will pay Makhafola Ltd annual rental payments of R500 000 for the building and has an option of buying the buildingafter the 35 years. Generally buildings of the same nature in Pretoria CBD are estimated to have an economic life of 40years. The fair value of the building on 28 February 2015 was R420 000. Makhafola Ltd incurred R12 500 as costs for legalconsultancy in drafting the lease. The applicable interest rate at the same date was 10% per annum. What is the class ofthe lease between Makhafola Ltd and Thato Ltd?Select one:a.General lease.b.Perpetual lease.c.Operating lease.d.Finance lease***WITH EXPLANATION On January 1, GEN enters into a contract with LORD for the sale of a high-end security scanner for P630,000. The contract includes a put option the obliges GEN to repurchase the scanner machine from LORD for P567,000 on or before December 31. The market value is expected to be P495,000 on December 31. LORD pays GEN P630,000 on January 1. The transaction should be accounted for as a: A. Sale B. Lease C. No sale/lease D. Cannot be determined
- Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?(1) On 31/12 / 20Χ0 the company V Corporation acquired a machine on credit. For the repayment, the company will pay an amount of € 7,000 on 31/12 / 20X0, an amount of € 5,000 on 31/12 / 20X1 and an amount of € 5,000 on 31/12 / 20X2.The usual credit terms are the full repayment of the price with the purchase. The annual market rate for these cases is 14%. Relevant calendar entries are requested assuming that V Corporation complies with IAS.A U.S. company has committed to pay 10 million kronor to a Swedish company in one year. What is the cost (in present value) of covering this liability by buying kronor forward? The Swedish interest rate is 1.2%, Exchnage rate is in the table
- Cassandra Company decides to enter the leasing business. The entity acquires a specialized packaging machine for P3,000,000 cash and leases it for a period of 6 years after which the machine is to be returned to Cassandra Company for disposition. The guaranteed residual value of the machine is P200,000. The lease term is arranged so that a return of 12% is earned by Cassandra Company. What is the annual rental payable in advance required to yield the desired return?On January 1, 2020 Arab Company leases a machine from GMC Corp. with 8 years useful life. The lease term is six-year requires payment of $87,000 at the beginning of each year. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee. If the fair value of the machine is $520.000, and the machine will be reverting to GMC Corp at the end of lease term. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. The annual depreciation for the leased machine at Arab Corp. as lessee is closed to: a. $43,366. b. $48,661. c. $72,394. d. $54,295.Credible Research sold a microchip to the Vausten Institute in Germany on credit and invoiced €10 million payable within half a year. Currently, the 6-month forward exchange rate is $1.10/€ and the foreign exchange advisor for Credible Research predicts that the spot rate is likely to be $1.05/€ in 6 months. (i) What would be the expected gain or loss from the forward hedging? (ii) As a decision-maker for Credible Research, would you suggest hedging this euro receivable? Please explain why or why not? (iii) what if the foreign exchange advisor anticipates that the future spot rate will be similar to the forward exchange rate quoted today. As the decision-maker would you propose hedging in this case? If yes or no why?
- 10. Using foreign exchange derivatives Mobile Insurance Company (a U.S.-based company) plans to invest about $30 million in Korean won 6 months from now. If Mobile Insurance Company is concerned that the Korean won will depreciate against the dollar by the time of the purchase, a won forward contract would benefit the company.A company buys an oil rig for P1,000,000 on January 1, 2020. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is P200,000 (present value at 10% is P77,110). 10% is an appropriate interest rate for this company. What is the amount of liability should be presented under the 2020 balance sheet as a result of these events?22. On December 31, 2020, Ebasan Company finished consultation services and accepted in exchange a promissory note with a face value of P300,000, a due date of December 31, 2023, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%, The service revenue to be recognized for the year ended December 31, 2020 is A. 300,000 B. 273,953 C. 262,694 D. 247,920 23. The carrying amount of the note receivable as of December 31, 2021 is A. 300,000 B. 273,953 C. 262,694 D. 247,920