Operation Management Essay

To be able produce specialized managers capable of fulfilling strategic tasks within business and government enterprises the need for the practice of operations management cannot be forgone. Operations management is very significant in business operations since it forms the heart of the organisation by controlling the system of operation. Operations management deals with the design, operation, and enhancement of the systems that generate and deliver a firm’s primary products and services. Like marketing and finance, operations management is a well-designed field of business with clear management responsibilities. Panasonic Corp. is a company in which produces various electronic components such as Audio, Video, Televisions, Information and Communication, Semi-conductors and other Electronic Components. In a business entity like Panasonic Corp. the use of operations management is very essential in every framework of the company’s activities. Panasonic Corp. uses operations management to ensure and maintain competence and effectiveness in the organisation. Efficiency in Panasonic Corp. s concerned with how well resources such as individual expertise and inputs are put in use irrespective of the reason for which they were deployed in the organization. The company through its performance ensures that the main objective for its establishment to generate profits and maximize shareholders value is realized. The company reduces its cost of production by ensuring that tangible and intangible possessions are not over stretched or wasted in the organisation. This is a situation where the company carries out effectively its goals to be the market leader using minimum resources to attain maximum output. The methods of effectiveness and competence in Panasonic Corp. leads to labour efficiency, yield, and capability fill working capital utilization and the efficiency of production systems. Panasonic Corp. also makes fine use of its products and services management through operations management. Product (or service) management includes a broad range of management activities, ranging from the time that there’s a new idea for a product to ultimately provide ongoing support to consumers who have purchased the fresh and innovative product. Every organization conducts product supervision, whether it’s done deliberately or not deliberately. Panasonic Corp. through this module provides a wide idea of considerations in producing and managing its goods. Panasonic Corp. uses it hub competences in the areas of manufacturing, branding, promoting through wholesale and retail outlets to achieve competitive benefits in the market place. Quality management is also a very essential aspect of operations management in every organisation. Panasonic Corp. s very crucial about its products developed for the consumer in the market place. Quality management is vital to effective operations management, particularly ongoing perfection to match the consumers taste and preference at all times. Management Control and Coordinating Function cannot be forgone in operations management particularly in a company like Panasonic Corp. Management control and coordination includes a wide series of activities to make certain that the company’s objectives are consistently being met in an effective and efficient style. Key approaches to the company’s organizational control and coordination contain product assessment, product allocation, marketing and promotion, sales and service and product advancement. The company also uses advertisements as a major tool to reach the customer. In this increasingly expanding and competitive marketplace, the company make sure its products and services are notably in the minds of their customers and clients. This occurs as a consequence of ongoing promotion and advertising by the company. Facilities management is also an essential task and its importance on operations management for Panasonic Corp. s required. Effective operations management in the company’s activities depends on a big deal of effective management of facilities, such as buildings, computer system, plants and machinery etc. Facilities management in Panasonic corp. is very important since the company may be busy in a batch or mass production depending on the demand conditions on the market. In this case facilities need to be managed in producing large quantities of products which must be consistent to meet the market demand at definite period. Well managed facilities help in production speed, lower per unit cost, manage and control the efficiency in the company’s production process. Inventory control and management is one important factor of operations management that Panasonic Corp. uses in its operations. Managing and controlling the inventory of the company is very critical and essential. Innovative methods, such as Just-in-Time inventory control, are some of the most important instruments used by the company to cut costs and move products and services to consumers more rapidly. Generally the significance of operations management on business is urrounded in every aspect of the organizations activities and therefore has vital role to play in ensuring that organizations attain their objectives and goals. Every organization, whether it produces goods or provides services furnishes customers with worthy products. Thus, to compete with other organizations, a company must transform resources (materials, labour, money, information) into goods or services as efficiently as possible. The upper-level manager who directs this transformation process is called an operations manager. The job of operations management (OM) is to transform resources into products which consist of all the activities involved in transforming a product idea into finished and final products. In other words, operations managers manage the process that transforms inputs into outputs. Like Panasonic Corp. all manufacturers set out to execute the same basic roles: to transform resources into finished goods. To perform this function in today’s business surroundings, manufacturers must constantly struggle to improve operational effectiveness. They must focus on quality, the costs of materials and labour and all costs that add no value to the finished product. Making the decisions in the effort to achieve these objectives is the job of the operations manager. That person’s responsibilities can be grouped as follows: * Production planning. During production planning, managers determine how goods will be produced, where production will be carried out, and how manufacturing facilities will be done. * Production control. Once the production process is started, managers must repetitively schedule and monitor the activities that make up that process. They must respond to feedback and make adjustments where required. At this stage, they also supervise the purchasing of raw materials and the usage of inventories. * Quality control. Finally, the operations manager is directly concerned in efforts to make sure that goods are produced according to terms and that quality values are maintained. Planning the Production Process Managers in Panasonic Corp. believe that the decisions made in the planning phase have long-range implications and are vital to a firm’s achievement. Before making decisions about the operations process, managers must consider the goals set by marketing managers. Does the company aim to be a low-cost producer and to struggle on the basis of price? Or does it plan to focus on quality and go after the high end of the market? Perhaps it wants to build a standard of consistency. What if it intends to offer a wide range of products? To make things even more complicated, all these decisions involve trade-offs. Upholding a reputation for reliability isn’t necessarily compatible with offering a wide range of products. Low cost doesn’t normally go hand in hand with high quality. With these factors in mind, let’s look at the specific types of decisions that have to be made in the production planning process. We’ve divided these decisions into those dealing with production methods, site selection, facility layout, and components and materials management. Production-Method Decisions The first step in production planning is deciding which type of production process is best for making the goods that your company intends to manufacture. In reaching this decision, you should answer such questions as the following: * How much input do I receive from a particular customer before producing my goods? * Am I making a one-of-a-kind good based solely on customer specifications, or am I producing high-volume standardized goods to be sold later? * Do I offer customers the option of â€Å"customizing† an otherwise standardized good to meet their specific needs? One way to appreciate the nature of this decision is by comparing three basic types of processes or methods: make-to-order, mass production, and mass customization. The task of the operations manager is to work with other managers, particularly marketers, to select the process that best serves the needs of the company’s customers. Make-to-Order At one time, most consumer goods, such as furniture and clothing, were made by individuals practicing various crafts. By their very nature, products were customized to meet the needs of the buyers who ordered them. This process, which is called a make-to-order strategymake-to-order strategyProduction method in which products are made to customer specification. is still commonly used by such businesses as print or sign shops that produce low-volume, high-variety goods according to customer specifications. Mass Production Automakers produce a high volume of cars in anticipation of future demand. By the early twentieth century, however, a new concept of producing goods had been introduced: mass production (or make-to-stock strategy)mass production (or make-to-stock strategy)Production method in which high volumes of products are made at low cost and held in inventory in anticipation of future demand. s the practice of producing high volumes of identical goods at a cost low enough to price them for large numbers of customers. Goods are made in anticipation of future demand (based on forecasts) and kept in inventory for later sale. This approach is particularly appropriate for standardized goods ranging from processed foods to electronic appliances. Mass Customization But there’s a disadvantage to mass production: customers, as one contemporary advertising slogan puts it, can’t â€Å"have it their way. They have to accept standardized products as they come off assembly lines. Increasingly, however, customers are looking for products that are designed to accommodate individual tastes or needs but can still be bought at reasonable prices. To meet the demands of these consumers, many companies have turned to an approach called mass customizationmass customizationProduction method in which fairly high volumes of customized products are made at fairly low prices. , which (as the term suggests) combines the advantages of customized products with those of mass production. This approach requires that a company interact with the customer to find out exactly what the customer wants and then manufacture the good, using efficient production methods to hold down costs. One efficient method is to mass-produce a product up to a certain cut-off point and then to customize it to satisfy different customers. The list of companies devoting at least a portion of their operations to mass customization is growing steadily. Perhaps the best-known mass customizer is Dell, which has achieved phenomenal success by allowing customers to configure their own personal computers. The Web has a lot to do with the growth of mass customization. Nike, for instance, now lets customers design their own athletic shoes on the firm’s Web site. Procter & Gamble offers made-to-order, personal-care products, such as shampoos and fragrances, while Mars, Inc. can make M&M’s in any color the customer wants (say, school colors). Naturally, mass customization doesn’t work for all types of goods. Most people don’t care about customized detergents or paper products. And while many of us like the idea of customized clothes from Levi’s or Lands’ End, we often aren’t willing to pay the higher prices they command.

As Dianne Skafte Essay

As Dianne Skafte stated in her book, â€Å"All the lives form the body of the Earth, and to that body all shall return†. The earth is viewed as the source of life with all the agricultural crops it gives to sustain the living. However, this very earth is also the home of the dead. People in different parts of the world plant their dead in the earth just like the seeds of their crops with the belief that their loved one will be born again as a new person, live in the body of an animal, or stay in the underworld. Otherwise, our ancients believed that the spirits who were returned to the earth become wise and that they gain the ability to turn into clairvoyants who can see the future and thus give guidance to those who are still living (Skafte 2000). This is the primary reason why necromancy was constantly used in the classical world. If a person decides to contact the dead, he or she will have the ability to know many hidden things. The act of necromancy falls under the umbrella of many different occult divination practices. The term was rooted from the ancient Greek language with the word ‘nekros’ meaning ‘corpse’ and ‘manteia’ or ‘prophesy’. Necromancy evolved through time and developed many different forms. Even though the Greeks may seem to be the civilization that is always connected to the act, summoning the dead was well-practiced by different civilizations around the world during these classical times like the Romans, Asians, Medieval Europeans, and Egyptians (Helium. com). The people living in the classical times look highly into their ‘necromaneias’ or the oracles of the dead. One famous act of necromancy was the one that happened in a hillside cave in Epiris where the famous legendary hero Odysseus was said to have summoned the dead at the place in order to get some guidance and information for his dangerous journey to home. Even though the Odyssey is only a fictional tale, Homer was able to base his writings from the actual practices of the many Greek necromancers that operate during their time (Donald Tyson’s Supernatural World. com). The place was also often connected to the worshipping of the goddess of the underworld, Persephone and the god of the dead, Hades. During the periods of medieval and renaissance times in ancient European history, the act of necromancy is considered as a normal part of the life of the people. There are other reasons why conjuring the dead is used. Wise-men ask for help from the spirits of the departed in order to seek for help in diagnosing the illnesses and giving cures to their patients. When it comes to families, they often seek for guidance from their dead loved ones and ask them to appear in their dreams. It was also believed that the souls of those who had already ‘crossed over to the other side’ have the rare ability in finding missing persons or even treasures that have long been lost. Spirits also help unearth some secret crimes that have been committed but were never given justice. The act of necromancy was so popularly used and believed in the ancient times that Catholic priests were even believed to have practiced the art centuries ago even though it was not openly discussed in their history books of their churches. Classical engravings also document some of the necromancy acts of famous philosophers and scholars of the time. Example of this is the one depicting John Dee, a 16th century mathematician with a famous necromancer. In the picture, the two were enveloped by a magic circle with signs of the zodiac and other symbols with a corpse in front of them. Another illustration was that of the Edward Kelly, an Elizabethan alchemist, and Paul Waring who are also protected by a magic circle while facing a corpse that has risen from the ground. All of these depictions were not fiction and were actual events. The use of the magical circle that shrouds both pictures mentioned serves as the protection of the humans from the forces of the spirit they have called that is mostly unhappy and unwilling to cooperate (Donald Tyson’s Supernatural World. com). During these times, scholars asking for the guidance and knowledge of the dead were not considered as an uncommon phenomenon. During the classical times, Nobilities or the Christian clergy were the literate members that compose high society. It is believed that either or both of these two groups were responsible for the spreading and practicing of the necromancy despite of the fact that is was strictly forbidden in Christianity. Access to necromancy is a kind of act that can only be accessible to those who belong to the scholars of Europe mainly because of reasons of accessibility, knowledge, and the procedures it use. Evidence to this fact is the number of confessions that a couple of Nobles and Clergy members expressed regarding their experience with the act. A closer look at the practices of necromancy also showed that the procedures are closely similar to Christian rites. In exorcism cases in Christianity, the spirits or demons were forces away through the use of the name of God, the Holy Spirit, or Jesus. This can be compared to the spells of necromancy which are similar to these rites in complete opposition (Necromancy. com). There are also examples of necromancy written in the Holy Bible. One of these is that on Samuel, chapters 28 and 31 that tell the story of King Saul and his abhorrence to David. In the story, he began doubting his decision of bringing David into his court because of the latter’s charisma in people and good skills of being a warrior. The King regretted letting David enter his kingdom when he started to notice that the people were already choosing the young man’s side instead of his. During that time, the Philistines were also preparing to attack. Out of desperation, King Saul disguised and went to see a ‘seeress’ to help him contact the dead. It shall be noted that the king has given an order to persecute all seers, wizards, and others that deal with the supernatural thus the need for his disguise as a common man. After the woman was convinced that she never have punishment for the request, she went onto a trance and related a vision to King Saul. According to the vision, she saw gods ascending from the earth which all gathered to form a man who is covered by a long mantle. As Saul bowed to the ground, he then recognized the spirit that possessed the woman as his deceased prophet, Samuel. But the vision was not the end of it. Samuel chastised the king for his evil attacks of David and said the because of King Saul’s violation of his covenant with the Lord, he will die the next day. The following die, King Saul’s soldiers were slaughtered and he mortally wounded. Knowing his coming fate, he decided to fall upon his own sword (Skafte 2000). Another example of necromancy mentioned in the bible was in Aeschylus’ Persians. In here, the necromancy procedure consisted of Queen Atossa asking the Persian elders to call Darius from his grave. The Queen brought some garlands of milk and different offerings like milk, honey, water, and unmixed wine and oil. The elders followed the queen’s request and called upon the deceased King asking for powerful death gods like Hades to send his soul in the face of earth. When King Darius was successfully summoned, he narrated the beating of the ground and the effect of the cries of the ‘necromantic cries’ on dead people like him (Bremmer 2002). This literary description supports the ancient beliefs about the two questions that are usually mentioned by the souls called through necromancy. The first is about the experiences and unknown secrets of the deceased while they are still living and the second, who is depicted by this story, are the relating of the souls of the ephemeral and magical things they’ve learned upon ‘crossing over’. There are many risks in calling the dead. One of these is through the perspective of Christians who condemn the use of the act. According to this side, the acquiring of knowledge from the dead is prohibited because it was not information that God prohibited to be released. According Christianity laws, there are only two legitimate sources of information that the living can use. These are the things that are revealed by the Lord and those that gleaned through a natural kind of revelation. Simply said, using necromancy to know secrets from the dead is also equivalent to stealing forbidden information. Second, spirits are not beings that people can simply call and command. The art of necromancy is divided into two different phases, the first of which is the calling of the spirit and the second is compelling it to do the bid of the necromancer. Since the spirits of the dead aren’t actually always willing to be called and ordered, there is a great risk for the necromancer and his assistant to be attacked by the former if they’re magical barrier is not that strong (Necromancy 101. com). Moreover, acts of necromancy should have well-defined motives because otherwise it will be considered as works of darkness, simply for the selfish whims of the person who wants to ‘call’ and can also turn out to be dangerous for the health and reason of the necromancer and his assistant. In necromancy procedures of classical times, necromancers are forced to inflict pain on the spirits they call just to force the latter to follow them. As a result of these, the souls are usually very unhappy towards the individuals, heightening the probability of them to become violent.Thus, there is a great risk that comes along with the valuable secrets a spirit may expose (Spence 1960). Bibliography: Bremmer, Jan N. 2002. The rise and fall of the afterlife: The 1995 Read-Tuckwell Lectures at the University of Bristol. Routledge. DeWaay, Bob. 2006. The Dangers of Divination. http://www. deceptioninthechurch. com/dangersofdivination. html (accessed June 14, 2009). Necromancy. 2009. Necromancy in History. Necromancy: Encyclopedia II. http://www. experiencefestival. com/a/Necromancy_-Necromancy_in_history/id/1575928 (accessed June 14, 2009). Skafte, Dianne. 2000. When Oracles Speak. Quest Books. Spence, Lewis. 1960. Encyclopaedia of Occultism. New York: University Books. Townbridge, B. 2009. Necromancy explained. Helium. com. http://www. helium. com/items/246248-necromancy-explained (accessed June 14, 2009). Tyson, Donald. 2007. The Truth About Necromancy. Donald Tyson’s Supernatural World. http://www. donaldtyson. com/necro. html (accessed June 14, 2009). Wendell, Leilah. 1997. Necromancy 101. The Occult Library. http://www. realmagick. com/articles/17/1817. html (accessed June 14, 2009).

Economic Order Quantity and Its Implementation on Business

ECONOMIC ORDER QUANTITY AND IT’S IMPLMENTATION IN BUSINESS Any business man, executive, and entrepreneur should know the basic tools for a company to develop in the market, regardless how big the business is, there are many factors involve. It is very important in every business to handle well developed financial and logistics processes. In order for a company to handle a correct logistic, without matter if it is a goods or services company, it is necessary to identify many factors.Some of the factors to be taken into account are many strategic and financial matters, such as the supply chain management, warehouses, distribution centers, inventory management, packaging and material handling, transportation, among others. A commonly faced problem in companies is that managers of manufacturing or distribution organizations, doesn’t know which will be the adequate quantity of inventory to have in stock. Many people would think that the more stock a company has is the best.I t is true that having a large amount of inventory will help customers to make faster and immediate purchases, shipments will be done quicker, and will prevent the company of being out of stock of certain product and causing some opportunity cost with the customers; it is important to notice that the stocking of products is very expensive. Some companies, such as Wal-Mart or Dell Computers, handle an efficient managing of inventory that has developed their competitive advantage. Wal-Mart helps it suppliers by having the right quantity of their products in the shelves, so that will minimize the inventory accumulation of the merchandise.In the case of Dell, instead of having lots of computers stored in warehouses, waiting to be sold, the company minimizes this cost by building a computer right after an order is placed. [1] They keep at hand many computer components to make this possible, as they have a policy of five-day delivery. In order for every business to succeed as Wal-Mart and Dell Computers have done, it is important first to understand the decision – making techniques that many companies used to have and effective and efficient inventory management and production control.The three main techniques are: Just – in – time system (JIT), Economic Order Quantity method, and a comparison between LIFO and FIFO. In this occasion I will focus precisely in a method for a well handling of the inventory, called Economic Order Quantity (EOQ) which has been used since the rise of the modern manufacturing processes in the early 20th century. The Economic Order Quantity is a calculating method used in small and large businesses in order to determine which will be the best level of inventory for production or purchasing while being the most cost effective.EOQ is a tool mainly used in Operations Management that helps to minimize the purchasing costs as well as the inventory handling costs. The first model of this method was designed by F. W. Harris bac k in 1913. [2] The Economic Order Quantity is use to know how much inventory should be order by a company at a particular time. The EOQ method is used as a part of a periodically review inventory system that helps monitor the level of inventory that a company has at the moment and a fixed quantity of product can be order at any time that the inventory has reached a specific reorder point.There is a model, or equation, that helps calculate the appropriate reorder point (ROP) and which will be the optimal reorder quantity for a successful replenishment cycle and inventory that will avoid a shortage, which may provoke the company to face some stockout costs. It helps determine the best point where the company can have the lowest inventory, holding, and ordering costs, by a mathematical formula that will show the number of units that the company should order. 3] It is very important to notice that not every business, company or industry uses the Economic Order Quantity method. It is a v ery useful tool in small businesses where the owners have to make the decisions regarding the amount of inventory they should be having on stock, which will be the quantity of a certain product that they will purchase or manufacture each time, and when will be the appropriate time to do it without having high costs.Mainly because when we refer to small business, most of the time are new business that have to learn slowly how the market is developing and how to handle it, that’s why the economic order quantity method is an important tool to know the correct logistic for inventory to have, as long as the business grow. Also it is very common to be used in manufacturing facilities, where they have a constant and repetitive ordering of stock and production, they should know what will be the most cost effective quantity to manufacture in order to not face a shortage or have more inventories that needed.Another example of types of business which find very useful the Economic Order Quantity method are the ones that handle several inventory activities such as maintenance, repair, and operation. Finally, another example will be all the companies that handle a large amount of stock and it is mainly used when goods and materials are purchased periodically. As we have already defined what the Economic Order Quantity method is, and which types of business used it, we have to determine which the main components of this model are.The EOQ is mathematical equation, as I said before, that will throw the appropriate number that a company or small business should purchase, in order to minimize as best as possible all the cost involved in the process. But for make it possible for this method to work, we need to know the main variables – such as demand, purchasing costs, production, etc – to be taken into account at the moment of calculating this EOQ. When a company will take a purchasing decision, it is important and very necessary take into consideration the costs involved in the purchase or placing of the order, as well as the inventory holding or carrying costs.In a mathematical way, the economic order quantity can be determined in two different ways. The first option is to present the answer in units. But before talking about every variable that is required for this method to be useful, we will define which is the equation used in this model. The Economic Order Quantity is the square root of [two times the annual usage, or demand of product, in units times the cost per order] divided by the annual carrying cost per unit. It is expressed as follows:

Status of women defined in the Arab culture Assignment

Status of women defined in the Arab culture - Assignment Example Many aspects in the Arabian cultures and including religion evidently show that Arabian men and women do not share equal privileges and rights in society. Women in Arabian countries hold lower status than that of their male counterparts. Most Arabs in Arabic countries, and those found in different parts of the world are known to follow the Arabic principles and customs. Although Islam is dominant in Arabic states, some Arabs belong to the Christian faith, while others are Jews. However, these still adhere to some of the Islamic principles. Therefore, the religion of Islam plays the major role in determining the different ways through which Arab men and women interact, including their status in society. Since Islam is a religion that has been present for many years, it is considered part of the culture in Arab countries, and this highly influences different social and cultural aspects of Arabs. The mainstream, secular discourse believes that Islam is oppressive to women. This is reflected in various practices in the Arabian cultures, which require women to act differently from men, in a rather discriminatory manner. For instance, women’s dressing is highly restricted. In most conservative Arab countries, women can only dress in clothes covering their whole bodies, and even veils for the head and face, as some allow women to only show their eyes, and not any other part of their bodies. This is in addition to many other practices, including those involving property ownership, which undermine women in Arab countries (Desiree Web). The status of women in Arab countries is directly related to the religion of Islam. In past times, women in Arab countries were secluded, and were not given the opportunity to take part in the public life. Women were rather confined to their private lives only. After independence however, Islam countries such as Tunisia have considerably changed the status of their women

Crimes such as employee theft of merchandise or customer or customer Term Paper

Crimes such as employee theft of merchandise or customer or customer theft (shoplifting) - Term Paper Example Theft of merchandize by employees accounts for approximately $50 billion losses on yearly basis, with small retail shops being the most affected (Hollinger, 2013). However, large business enterprises also suffer great losses but compared to small enterprises, they have a higher capacity to absorb the losses hence can stay longer in business to unearth such theft. Small retailers have no such capacity and hence, regular theft ends up ruining the business completely. It is estimated that more than 75% of employees in the US engage in this atrocity, in one form or the other, hence indicating that there is strong need to reevaluate strategies being used by businesses to curb this type of crime (Walsh, 2000). This paper is a critical evaluation on employee theft as a major dilemma in business. Employees are an important resource for a business, whether in production, marketing, supply or even in retail business. This is due to the fact that they provide services that cannot be performed by any other mechanism in exchange for remuneration among other financial and nonmonetary gains. As an employer, the most important goal is to maximize profits and in businesses that entail buying and selling, profits can only be obtained by ensuring that every item leaving the stores is fully paid for and if not, it has to be accounted for. However, statistics indicate that this is not usually the case. Numerous products are being stolen by employees, who are entrusted with the responsibility of maintaining and managing businesses. 75% of employees in the US are stealing from their employers, not just once but repeatedly). No wonder cumulative losses can reach up to more than USD 50 billion on yearly basis (Walsh, 2000). With this trend, it is most likely that more and more businesses wil l continue to collapse and this can only be hurting, not only for business owners but also the global economy as a result of

The car that saved JLR Coursework Example | Topics and Well Written Essays - 2250 words

The car that saved JLR - Coursework Example The culture of an organization is an eminent part of countless decisions made in business. The ideas, assumptions, ethics, values, attitude, and belief of an enterprise govern ways in which employees think and behave. Culture is considered as a base of organizational strength that directs the resources and holds them together. Culture is often defined as a concoction of inheritance, customs, values, lifestyle, and tradition shared within a social group (Hanges, et al., 2004). Although the definition of organizational culture is unclear, yet it is very important for every organization. The organization culture differs from one organization to another. At many situations, the terms ‘organization culture’ and ‘corporate culture’ are used interchangeably. Corporate culture is the reflection of an organization’s personality. It takes into account shared values, methods, and policies that are implemented by an organization and its employees in order to meet everyday business problems (Milne, 2007). The corporate culture of an organization is reflected in its employee’s attitude and behavior. The culture of any enterprise adds meaning, clarity, and dimensions to its various functions, thereby helping to achieve organizational goals. The organization culture allows employees to be on the same platform and defines the way they interact among themselves (Seel, 2000).According to Fincham and Rhodes (2005), main attributes of culture is that it is symbolic, unifying and holistic in nature.

Comparative Design Essay Example | Topics and Well Written Essays - 2500 words - 1

Comparative Design - Essay Example enefits spread over three categories affecting customers’ services and users, the service design program, as well as the entire institution involved in the design project. A product of 1946, the classic and styling oven has cooking efficiency. A classic cooker limited secures ovens from Rayburn in the UK. The cookers are reliable with new options still applicable to date. Currently, the supplier undertakes reconditioning duties and installs new parts fully. In a style that Mark Newson adopted, Rayburn ovens of 1946 have attractive colours running on smooth lines. The design developed a classic design blending precisely with various styles those chores in the kitchen demand. It cuts across from traditional through to modern aspects. The oven comes out in various designs and sizes that clients can choose from guided by their needs. Surprisingly, a Rayburn oven carries more responsibilities besides being a cooker. The oven is extremely resourceful. The Rayburn oven developed in 1946 is sustainable as well as self-sufficient. Mark Newson introduced extraordinary creativity constituting one of the most exciting designs in the world. He applied the creativity in developing domestic appliances such as ovens. Mark Newson is the established designer at Smeg products whose work is comparable to dynamic artworks. He represents the essence of the philosophy at Smeg. At Smeg, employees believe in technology with style. The style applied by Newson in designing his ovens comes through the soft lines applicable in environmental friendly manner. Differentiated use of colour and energetic application characterises ovens designed by Mark Newson. Surfaces are stainless steel products or have glassy features. Ovens are available in prolific FP610.The ovens come in a spectacular ray of colours. The colours range from white and black finishes, stainless steel through to bright shades of yellow, blue, as well as green. Mark Newson, the designer, o ften has a special way of having

The Marine Insurance Act 1906 states 'Subject to the provision of this Assignment

The Marine Insurance Act 1906 states 'Subject to the provision of this Act, every person has an insurable interest who is interested in a marine adventure' - Assignment Example Those with insurable interest in marine insurance includes everyone who would suffer loss in the event of the insured risk occurring. Such include the owner of the consignment under shipping, the seller of the goods, the mortgager and mortgagee among others. The paper will discuss when insurable interest exists according to the Marine Insurance Act 1906 and outline hull and cargo interests which define the types of marine insurance. Noussia (1) and Giaschi (1) note that at around 215 B.C., the Lloyds of London developed measures to ensure that they are protected against losses incurred during their trades as they ship cargo to West Indies. Merchants would come together and have each of them bear part of the maritime risk such that they would share any losses occurring during such adventures. With time, the strategy shifted to using individuals who did not have any interest in these adventures where they would pay premiums to them and transfer maritime risks to them. In the modern world, commercial insurers bear the cost of compensation by accepting premiums depending on the magnitude of the risk involved. According to the National Archives, marine insurance refers to the insurer undertaking to indemnify the assured against losses occurring during a marine adventure as per their agreement, in manner and extent. This could be extended through its express terms to cover against losses on land or inland waters as a consequence of sea voyage. According to the UK Marine Insurance Act 1906, referred to as the mother of all statues on marine insurance by Birds (5), everyone interested in a maritime adventure has insurable interest. Such persons could have a legal relation to the adventure or could have property therein that could be insured, of which, its safety or due arrival would be of direct benefit. Loss, damage or detention of such property

Harriet Jacob's Incidents in the Life of a Slave Girl Essay

Harriet Jacob's Incidents in the Life of a Slave Girl - Essay Example I also think this quote is significant to me because as Harriet explains, both masters and mistress felt no sympathy to suffering slaves and even proclaimed to them heartlessly that heaven was not their place. In my own opinion and judgment I would imagine the extent to which these people suffered in the hands of their masters, despite the fact that in her childhood, Harriet mistress quoted the Bible and told her that she should not do any evil to her neighbor, it was the same mistress that was subjecting her and her family to slavery. This was a complete hypocrisy and furthermore, it demonstrates the extent to which the whites took slavery as part of their normal lives. Harriet Jacob’s story is more revealing in an exceptional way; it clearly demonstrates her desire to stand for her rights and the rights of other slaves that they suffered together. This is evident by the fact that she openly expressed her sufferings from sexual degradation and enslavement. She was able to rea ch the hearts of many people who later contributed to the fight against slavery. Jacob’s story also connects many other historical suffering that came before and after her story. In essence, in later 1960s in the era of the civil rights activists, many people were killed and their fundamental rights violated by their masters. In the extract from Fredrick Douglas The Meaning of July Fourth for the Negro, â€Å"Fellow-citizens, pardon me, allow me to ask, why am I called upon to speak here to- day? What have I, or those I represent, to do with your national independence? Are the great principles of political freedom and of natural justice, embodied in that Declaration of Independence, extended to us? and am I, therefore, called upon to bring our humble offering to the national altar, and to confess the benefits and express devout gratitude for the blessings resulting from your independence to us?†(184) In this quote, Fredrick Douglas had been called upon to speak during the celebration party of the U.S. independence in Rochester, New York. He had previously made many speeches and lectures in an area of about five miles in Rochester. This speech was particularly important because despite the fact that America was celebrating its 76th birthday, Fredrick and what he represented did not have anything to celebrate about. This speech means a lot to me because Fredrick spoke in irony; he even asked questions about the relevance of the Independence Day to him and his fellow black slaves. This quote is significant in the sense that despite the age of the nation approaching a century, there was no freedom for the black community; racial segregation was the norm of the day. The rights of the minority were not recognized by the same country that they toiled to build. In my opinion and judgment, I would see the pain that Fredrick was undergoing; his speech is ironic and full of desire to get equal rights with their white counterparts who were celebrating the bi rth of their country. It was an irony and mocking to invite a slave to the celebration of their independence from the British government. This quote reveals Fredrick’s passion to end slavery; he clearly fought for his rights and the rights of his fellow minority black community. He resisted injustice by airing his views about the whole idea of freedom that the country was enjoying. His experience also connects with other civil rights activists that came after him and specifically during the 1960s with Malcom X and Martin Luther King. Both

Financial and Management Accounting Essay Example | Topics and Well Written Essays - 1500 words

Financial and Management Accounting - Essay Example It helms in planning and decision making and is governed by strict international standards. Financial accounting plays crucial role in the business world today. It is through financial accounting that flow of money and resources in a business organization is monitored. This includes wages and salaries among others. Since financial accounting involves preparation of key documents like profit and loss account and balance sheet, it shows how transactions are done over a period of time. It also helps stakeholders and would be investors to make the right decision on investments. Financial accounting is governed by a number of legal requirements and principles. According to Collins and Collins (2009), the business entity principle must be observed. It states that each business establishment must be accounted separately and that personal issues should not be accounted together with the business issues. Cost principle should also be in place. It states that only costs as a result of business dealings should be included in the financial account. Objective principle, which stipulates that all information in the financial accounts should not be subjected to personal opinion, should also be observed. Finally, the going-concerned principle should also be observed. This is a legal requirement that states that business operation will go on as long as the business gains assets and discharges liabilities during its normal operations. Financial accounting has a lot of advantages. According to Daniel (2007), financial accounting helps many business establishments to comply with legal requirements which include tax returns among others. Financial statements, such as balance sheets, help the institution in communication in the organization. Financial accounting also helps in protecting business assets, since flow of money and assets is recorded periodically. Finally, it helps in appropriate decision making,

Bilateral Trade Agreements Essay Example | Topics and Well Written Essays - 750 words

Bilateral Trade Agreements - Essay Example Bilateral trade agreements can also create political and economic ties between the parties, which in turn provide more stability" (Rodrguez). However, it provides loopholes wherein powerful nations can exploit the agreements to the disadvantage of the developing countries. One of the opposition to the free trade, such as the bilateral trade agreements is the "infant industry argument" (Mankiw). It is based on the belief that the industries of the developing nations might not be well equipped to compete against the giants of the more powerful nations. This then will lead to the death of the local industry. Bilateral trade agreements simply kill the local industries who have not exhibited economies of scale. In economics terms, the failure to achieve economies of scale on the part of the local industries, because they are relatively new will result to a less efficient production compared to those who are old in the industry and this will be manifested in the relatively high prices of the former (Robert S. Pindyck). This argument is validated by the study of Rodriguez. According to him trade agreements between nations with large economic level discrepancy can actually hurt the weakest party (Rodrguez). Moreover, he gave the following effects on the developing nations of trade agreements. Reciprocity and national treatment (the obligation whereby foreign goods, services and economic operators must receive the same treatment as local ones) oblige developing countries to implement broad liberalisation in market access in goods, services and government procurement, which may result in surges of imports; moreover, tariff elimination, besides depriving developing countries of revenues, removes powerful instruments of industrial and agricultural policy to protect their infant industries. Market access gains for developing nations may be limited if agricultural subsidies in rich nations are not reduced; restrictive rules of origin, technical barriers to trade (TBTs) such as quality standards and supply-side constraints also limit the possible gains from improved access to developed countries' markets. Reduction of policy space for developing countries; many of the issues included in the current North-South FTAs 'reduce or fully remove policy options and instruments available to a developing country to pursue its development objectives' (UNCTAD, 2007) Source: Rodrguez The United States is one of the countries who have been very active in pursuing bilateral trade talks against smaller nations. Some of these agreements are with Costa Rica, Chile and Singapore. "In the past two years, the US has initiated comprehensive free trade negotiations with 19 countries, a market representing an estimated US $2.5 trillion worth of opportunities to American business. Simultaneously, however, these agreements open the American market, exposing, in particular, US industries dependent on sweat labour that cannot compete with low labour costs in poorer countries around the world. The difference is that the US has the resources to diffuse the pain of the transition, amounting to support of US$1.8 billion in 2003, while developing

Needs of Customer Essay Example for Free

Needs of Customer Essay When customers walk into a restaurant, whether it is McDonalds or Chez Pierre, they expect to be acknowledged. This is a small service, but it is imperative to the success of the restaurant, as customers who are not greeted may simply walk out and eat somewhere else. The type of host a restaurant has will depend on the type of restaurant it is as well as how busy it is. Some restaurants pay hosts to greet customers, call names off waiting lists and walk customers to their tables. In other restaurants, management and wait staff take over this duty. Regardless of what you can afford for your restaurant, always make sure someone has the responsibility of greeting the guests and that person knows it is her responsibility. Wait Staff When customers go to a restaurant, they expect a good wait staff, unless they are dining at a fast-food chain. Even then, customers expect the counter workers to get their orders right in an appropriate amount of time and solve problems quickly and courteously. In traditional, sit-down restaurants, customers expect the wait staff to be attentive, but not too attentive. Wait staff should not hover or interrupt, but they also should come back frequently enough to attend to their customers needs. In addition, they should bring food in a timely manner and handle problems, such as food that has been sent back pleasantly. Customers also expect wait staff to be friendly and personable. Environment Customers usually go to restaurants to meet with others socially in a friendly environment. Although environment is not usually considered a service, service plays a large role in creating a good environment. In addition to making sure the restaurant is clean, attractive and the decor is consistent with the food and restaurants image, restaurant owners need to tell their staff it’s OK to let guests linger. Wait staff should not hint that it is time for the guests to go. For example, they should not rush the food to the table unless the customer requests it. They also should not start to clean nearby tables in an obvious manner or wait for customers to get out their money to pay the check. To the contrary, wait staff should say things like, Feel free to chat as long as you like let me know if youll need some dessert or a drink refill. Food and Drink Probably the most important service that a customer expects to receive when dining out is a good selection of delicious and well-presented food. According to London wine writer Jamie Goode, it is more important that food be simple and good tasting, made with quality ingredients, than to be fancy or pretentious. Goode also notes that customers expect a large wine selection that is not overpriced. Furthermore, customers expect food to be consistent with the image of the restaurant. Customers who are dining at a family restaurant, for example, expect sandwiches, traditional dinners and moderate prices. At a more elegant restaurant, prices can be higher but food needs to be more of the gourmet variety.

Treating Alcoholism

Treating Alcoholism Introduction Alcoholism is defined as a disease that is persistent, progressive and often fatal. It is not a symptom of other diseases or emotional problems; it is its own disorder. Alcohol affects every part of the body even the brain which will eventually adapt to the alcohol use by becoming dependent on it after prolonged use. Genetics and environment are factors that are influenced by this disease. Drinking can reduce life expectancy by 10-12 years and next to smoking is the second most common preventable cause of death in America. The earlier a person starts drinking, the greater their chance is of developing serious illness later on. Once dependant on alcohol, its very difficult to quit. The cause of alcoholism is unknown. Just drinking gradually and consistently over time can produce alcohol dependence and cause withdrawal symptoms during periods of abstinence, but this is not the only cause of alcoholism. To develop alcohol dependence several other factors typically come into play, like genetics, culture and psychology. The signs of alcoholism or a dependence on alcohol vary from person to person and depend on how much the person drinks or how the person drinks. The definition of alcohol use and abuse ranges from moderate drinking, which is defined as equal to or less then two drinks a day for men and equal to or less then one drink a day for women. Hazardous or heavy drinking would be defined as more then 14 drinks per week or 4-5 drinks at one sitting for men or more then 7 drinks a week or 3 drinks in one setting for women or frequent intoxication in either gender. Harmful drinking is when alcohol consumption has actually caused physical or psychological harm or alcohol consumption has persisted for at least a month or has occurred consistently for a year. Alcohol abuse is used when the person either cant fulfill work or personal obligations and/or has recurrent problems with the law. Alcohol dependence is used for people that three or more alcohol related problems in a period of one year that in cludes increased amount of alcohol needed to produce an effect earlier obtained with less alcohol, experiences withdrawal symptoms or drinks to avoid withdrawal symptoms, drinks more then intended, unsuccessfully attempting to cut down or quit, gives up hobbies or leisure activities to drink. Summary Emotional and behavior problems such as depression and anxiety put people at a high risk for alcoholism and often are the reason the elderly turn to alcohol. Problem drinking in this case can be a way to self medicate. People may also use alcohol to become less inhibited in public situations that for some may be a source of great anxiety. Those that have impulsive personalities are also at a great risk for developing dependence to alcohol, due to the fact that they have low impulse control. Alcoholism affects every part of the body causing illness, cancer and with long term consumption can even cause death. Frequent, heavy drinking is associated with a higher risk of death to injury, violence and medical disorders, like pancreatitis, upper gastrointestinal bleeding, nerve damage and even impotence. As people age it takes few drinks to become intoxicated and organs are damaged by smaller amounts of alcohol then younger people. Those that require surgery also have an increased risk of postoperative complications, including infections, bleeding and decreased heart and lung functions, along with wound healing problems. If withdrawal symptoms are present can inflict further stress on the body and delay healing. Neurological or mental disorders can be caused from binge drinking which can cause memory impairment and problems thinking and concentrating. Nerve damage from severe vitamin deficiencies can impair mental function and memory and cause emotion disorders and even psychosis, like Wernicke-Korsakoff Syndrome, that causes loss of balance, confusion and memory loss and can lead to permanent brain damage and even death. Diagnosing alcoholism can be hard, since nearly always people deny the problem. But for most, denial may be the first warning sign that their drinking is out of hand. There are tests to screen for alcoholism, most are short and allow the person to take them on his or her own time. Because people deny their problem or attempt to hide it, the questions relate to problems associated with drinking, rather then the amount of liquor consumed. The quickest test is the CAGE test and is an acronym for: 1. Attempts to CUT (C) down on drinking. 2. ANNOYANCE (A) with criticisms about drinking. 3. GUILT (G) about drinking. 4. Use of alcohol as an EYE-OPENER (E) in the morning. This test is called a Self Administered Alcoholism Screening Test (SAAST) and appears to be the most useful in detecting alcoholism in white middle aged males. Alcoholism, hard to detect in elderly women is sometimes diagnosed as depression and prescribed anti-anxiety drugs that can have dangerous effects when mixed with al cohol conclusion Treatments for alcoholism vary, but the overall goal in treatment is total abstinence, since those that abstain have better success rates then those that dont. Treatment should also, include replacing addictive patterns with satisfying, time filling, behaviors which are able to fill the void in daily activities when drinking has stopped. Because alcoholism is so difficult to treat, most doctors will choose to treat alcoholism as a chronic disease that include relapses and remission periods. Inpatient and outpatient treatments are available to those that would benefit most from these types of treatments. Those with co-existing medical or mental disorders or those that might harm themselves have greater success with inpatient treatments at a psychiatric hospital or alcohol center. Outpatient treatments work best with people that have a good support system and are able to take medications for mild to moderate withdrawal symptoms. Psychotherapy treatments focus on Psychotherapeutic approaches and include cognitive-behavior therapy is used for severe alcoholism and gives people the opportunity to learn to cope and control their behavior, by changing the way they think about drinking and Interactional group psychotherapy that includes group based therapy like Alcoholics Anonymous or AA, 12-step program. Alcoholism is a very real and serious disease that requires medical treatment and those suffering will require lifelong care and support.

Evaluating Coca Colas understanding of its Consumers Behaviour

Evaluating Coca Colas understanding of its Consumers Behaviour 1.0 Introduction A consumer is a person who spots a need or desire, and then looks for the best way to satisfy his or her need either by purchase or acquisition (Solomon et al, 2010). Consumer behaviour as defined by Solomon et al (2006) is the processes involved when individuals or groups select, purchase, use or dispose of products, services, ideas, or experiences to satisfy needs or desires. Customer retention is vital these days and organisations are looking for the best way to please and satisfy the interest of their consumers. According to Fill (2009), the understanding of the buyers behaviour makes marketing strategies and plan come out successful. The Coca-Cola Company is soft drink industry that has been able to build its brand loyalty with its consumers over its years of operation, despite the highly competitive market (Euromonitor, 2010). But this success would not have been realistic without understanding who the consumer is, what the consumer needs and how the consumer behaves. The Econo mic recession was a trying time for companies which led to the closures of some and loss for majority, the soft drink industry is not an exception and Coca- cola which falls under the soft drink industry will be analysed on how effective the management of their consumers was to in ensuring their survival in the recession. 1.1 A brief summary of The Coca- Cola operations The Coca-Cola Company (TCCC) is the largest manufacturer, distributor and marketer of non alcoholic beverage, concentrates and syrups in the world. Coca-cola has a portfolio of more than 3,300 beverages, from diet and regular sparkling beverages to still beverages such as 100 percent fruit juices and fruit drinks, waters, sports and energy drinks, teas and coffees, and milk-and soy-based beverages, which are now sold in more than 200 countries in the world. (Coca-cola, 2010). Coca- cola first got to Britain in the year 1900, after Charles Candler brought a jug of syrup along on a visit to England. Soon after, in the early 1920s, it went on sale at the London Coliseum and in Selfridges. Since then coca-cola Britain has come up with innovative soft drinks namely: Coca-cola; Diet Coke; Coca-cola zero; Sprite; Sprite zero; Fanta;Fanta Zero; 5 Alive; Schweppes; Schweppes zero; Powerade; Powerade zero; Kia ora; Kia ora(no added sugar); Dr. Pepper; Dr. Pepper zero; Lilt; Lilt Zero; Oasis; Oasis extra light; Glaceau vitamin water and Relentless. (Coca-cola, 2010) With about 4,650 employees, Coca-cola GB claims to have sold 228million cases in 2008. Pic. 1.1 The Coca-Cola Company Great Britain brands Available on this link- http://www.coca-cola.co.uk/brands/ 1.2 An overview of the soft drink industry in Great Britain Mintel (2010) stated that close to one-quarter of companies in the UK soft drinks market is growing at more than 10% per year. Some of the main players in the UK soft drink industry include Coca-cola, Pepsi cola UK, Tropical UK, Nestle UK etc to mention but a few. The British Soft Drinks Associations 2010 UK Soft Drinks Report found that the overall market grew by 1.7% in 2009, with total consumption reaching 14,140 million litres, at a retail value of  £13.224 billion (Mintel, 2010). The British Soft Drinks Assocaition (2010) stated that it was encouraging to see that the soft drinks market was holding up during the economic downturn. According to M intel (2010), for the second year running, Coca-cola topped interbrands best global brands table, placing it above its competitors in the soft drink industry. The coca-cola company has continued to focus on expanding its business through taking tactical places in niche soft drinks producers, by purchasing a stake in UK smoothie produce r, Innocent Drinks (Euromonitor, 2010). 1.3 The recession in United Kingdom Recessions occur during the down or contraction phase of the business cycle. The term business cycle refers to the familiar ups and downs of economic activity. (Pearce and Michael 2006). Furthermore, Pearce and Micheal (2006) opined that recessions cause significant declines in resources available to the firm because customers spend less, lenders lend less, and competitive rivalry increases. Initially, the behaviour of consumers changes during recessions. They have less money to spend and cut back personal spending in response to the overall decline in economic activity. Industrial and business customers may become disloyal, demand renegotiated contract terms, and alter purchase patterns. Also by Pride and Ferrell (1995), recession is a stage in the business cycle during which unemployment rises and total buying power declines, stifling both consumers and business peopless propensity to spend. The UK economy was growing faster than the average for the Euro zone throughout most of this decade. However, an abrupt slowdown began in 2008 and the economy entered a recession in the third quarter. According to Euromonitor (2010), real gross domestic profit fell by 4.9% in 2009, making this the UKs longest post-war recession. The UK has been harder hit than many countries because of its large financial sector. The fiscal position has deteriorated over the past several years. The deficit was pushed even higher as a result of the bailout of large banks. The number of unemployed also rose by 50% during the recession with 800,000 jobs being lost (Euromonitor, 2010). The recession led to business closures, job losses and a lack of employment opportunities in the UK (Athey, 2009). This first global recession in the new era of globalization, started in the US, spread to Europe, and eventually became global; its the worst economic crisis since the great depression. (Stiglitz and Joseph, 2 009). 1.4 The Coca-Cola Company and the recession TCCCs gross profit margin decreased to 64.2 percent in 2009 from 64.4 percent in 2008, primarily due to foreign currency fluctuations, adverse geographic mix as a result of expansion in their up and coming markets, current focus to steer better reasonable initiatives across different major markets and unfavourable channel and marketing mix in some certain markets. (Coca-Cola, 2010). Even though there was a slight decrease (0.2%) in their profit margin compared to the previous year, TCCC arguably performed well despite the economic downturn. The unit case volume in TCCC is one of the measures of the fundamental strength of the company because it helps to measure progress at their consumer level. In Europe, the sales volume of year ended 2009 versus year ended 2008 shows that the unit case volume in Europe decreased 1 percent, caused mainly by the ongoing hard macroeconomic situations in most part of Europe. These hard macroeconomic conditions influenced major markets and caused a decline in the unit case volume of 8 percent in South and Eastern Europe, 4 percent in Iberia and 2 percent in Germany. The volume declines in these markets were partially made up for by 6 percent unit case volume growth in France and 4 percent growth in Great Britain.(Coca-cola, 2010). Table 1.1- Financial result of The Coca-Cola Company Year Ended December 31, 2009 2008 2007 2006 2005 (In millions except per share data) SUMMARY OF OPERATIONS Net operating revenues $ 30,990 $ 31,944 $ 28,857 $ 24,088 $ 23,104 Net income attributable to shareholders 6,824 5,807 5, 981 5, 080 5, 872 GROSS PROFIT 19,902 20,570 18,451 GROSS PROFIT MARGIN 64.2% 64.4% 63.9% PER SHARE DATA Basic net income $ 2.95 $ 2.51 $ 2.59 $ 2.16 $ 2.04 Diluted net income 2.93 2.49 2.57 2.16 2.04 Cash dividends 1.64 1.52 1.36 1.24 1.12 BALANCE SHEET DATA Total assets $ 48,671 $ 40,519 $ 43,269 $ 29,963 $ 29,427 Long-term debt 5,059 2,781 3,277 1,314 1,154 1.5 Scope of Study The interest of this study lies mainly with The Coca-cola Company, focusing on Coca-cola Great Britain as the scope of study. This study also examines the level at which the recession affected the sales in coca-cola and the consumers attitude towards the purchase of coca-cola. CHAPTER TWO 2.0 Key Consumer Behaviour Aspects According to British Soft Drinks Association, (2010), Consumers are loyal to the drinks they know and trust but remain open to innovative products and brand extensions which meet their ever-evolving needs. The industrys ability to provide the public with a wide range of enjoyable and affordable drinks will ensure it remains resilient despite the tough economic climate. Three key consumer aspects have been carefully selected from Jiang (2010) as explained in the Consumer Behaviour Lectures; the following aspect of the consumer behaviour may have influenced the continuous purchase of coca-cola products despite the economic downturn- the buying process, Attitude formation and Motivation. 2.1 The Buying process A buying decision making process is the selection of an option from two or more alternative choices (Jiang, 2010). Coca-colas consumers can be explained in Consumer as a Problem Solver (Habitual Decision Maker). A habitual decision maker makes choices that are characterised by an impulse made with little effort and without conscious control (Solomon et al, 2006). Coca-colas brands are low involvement products and so require little information search. Most decisions made by people who consume coca-cola are with little or no conscious effort. Coca-cola consumers purchase Coke for example based on a habit that has been formed over time. Also the Evaluation of alternatives can be used to explain the brands resistance to the recession, much of the consumers effort that goes into a purchase decision develops at the stage in which a choice must be made from the accessible alternatives (Solomon et al, 2006). In many cases, there are a number of alternatives (such as water, soft drink or alcohol) a consumer could consider in satisfying a biogenic need, i.e. to conquer thirst. A consumer that has formed a habit overtime to purchase diet Coke for example will always have in mind a diet coke whenever hes thirsty. Branding can also be an influence on the evaluation of alternatives. In a survey of Global Brands, Inter Brand and Business Week identified the significance for companies to create communities around their products and services, which gives the customers the opportunity to feel as if they own the brand (Solomon et al, 2006). Fill (2009) also supported that as a brand becomes established with a buyer, so the psycholo gical benefits of ownership are preferred to competing offerings, and a form of relationship emerges Coke is not only seen as a drink by its consumers, but seen in the light of its heritage and relationship with them( Payne,2007). Brands also create impressions and strong feelings so much that when people see the coke bottle with its red label, and the content, people suddenly feel thirsty and the need to have a drink (Riesenbeck and Perrey, 2007) According to Mintel, (2010), the Interbrand ranked Coca-cola as the number one global brand in the year 2009 and 2010 respectively. Brands can influence a consumers choice in a decision making process, in a study conducted, 51percent of consumers preferred Pepsi over Coke , while in an open test, only 23percent preferred Pepsi over coke(Jenkinson, 1995). In my opinion, Coca-cola consumers have developed a relationship with the brand, which makes them to choose coca-colas brands amongst all other alternatives even in a recession. The econom ic downturn did not affect consumers choices, habits did not change despite the recession; coca-cola consumers did not change their product preferences because a habit has been formed over time. Table 2.1 Buying Decision making process Evaluations After purchase behaviour/feeling Involvement Information search Need recognition Need Purchase Decision Identity Alternatives Source- (Jiang, 2010) 2.2 Attitude Formation and change Attitude is a persons learned predisposition, tendency to respond to an object in a consistently favourable or unfavourable way (Allport, 1935) as cited by (Jiang, 2010). An attitude formed, lasts over a period of time, an attitude towards what a person eats or drink or developing an attitude towards different brands (such as drinking diet Coke rather than drinking diet Pepsi) or also having an attitude towards a general consumption pattern(such as eating twice to eating once in a day) (Solomon et al, 2006). The Utilitarian Function which is related to the basic principles of reward and punishment will be used to explain why TCCC was not entirely affected by recession. Attitudes are formed based on the presumed product qualities (either pleasure or pain) (Solomon et al, 2006). Attitudes influence a consumers decision making and the goal of a marketer is always to create a positive attitude towards a product or change existing attitudes (Fill, 2009). In a recent research conducted by TCCC to evaluate consumers attitudes towards its brands, it revealed that coca-cola is the brand most associated with happiness (Coca-cola, 2010). The result of the survey revealed that over a half of the people that participated in the research said its the taste that makes them smile others said sharing a bottle of coca-cola with family and friends can provide an opportunity to spend time together (Coca-cola, 2010). Coca-cola consumers have developed an attitude overtime, so the recession would not change their product preference but might just alter their consumption pattern (such as reducing the intake of one three bottles per day to two bottles per day). The theme of the TCCC also stresses straight forward benefits (Coca-cola.Open Happiness). TCCC develops strategies to penetrate their consumers lifestyle to pass a message. In order to promote Coca-Cola Zero (one of Coca-Colas brands),TCCC partnered with the Twentieth Century Fox and director Ja mes Camerons for his epic-adventure and blockbuster film Avatar. This promotional strategy helped to form an attitude towards Coca-Cola Zero and raise its awareness. They also use promotional activities and sponsorship of events such as the Olympic Torch Relay in 11 countries, and the Vancouver 2010 Olympic Winter Games(Coca-Cola 2010) and also Attitudes towards coca-cola could also be formed by the yearly coca-cola adverts, as supported by Pearce and Micheal (2006) aggressive marketing campaigns may be more effective during recessions, as competitors feeling the pinch might attempt to forestall losses by reducing their advertising. During the recession, TCCC, engaged in massive paid advertising to reinforce their brands in the minds of the consumers. Also towards the end of each year, coca-cola does an advert, using the Christmas theme to convey its message to its viewers. The viewers feelings about the context in which an advertisement appears can also influence brand attitudes (Solomon et al, 2006). Liking this Christmas themed adverts would naturally link us to Attitude Formation (three hierarchies of effects), Affect, Behaviour and Beliefs. Affect (like the brand), behaviour (buy the brand), belief (feel satisfied with the brand) or belief (create awareness of the brand), behaviour (buy the brand), affect (like the bra nd) or belief (create awareness of the brand), affect (like the brand), behaviour (buy the brand). Attitude formed over time influences a consumers purchase behaviour, in spite of the recession, it can be argued that the attitude of the coca-colas consumers did not change, and there was a continual process in consumers purchase pattern. Coca-cola was not so affected by the recession because of the consumers attitudes towards their products Table 2.2 Three Hierarchies of Effects Attitudes based on cognitive information processing Affect Attitudes based on behavioural learning processes Behaviour Behaviour Behaviour Beliefs vvv Beliefs vvv Beliefs vvv Attitudes based on hedonic consumption Affect Affect Source- (Jiang, 2010) 2.3 Motivation Motivation is the driving force within individuals that impels them to action, this driving force is produced by a state of tension which exists as the result of an unfilled need (Jaing 2010). Every action is done for a reason. Motivation refers to the process that cause people to behave as they do, motivation occurs when a need (Utilitarian-consumers practical benefits or Hedonic-consumers emotional benefits) is aroused that the consumers wishes to satisfy. The desired end- state is the consumers goal. The degree of arousal is called a drive (Solomon et al, 2006). The purpose of purchasing a drink would be to satisfy a biogenic need, i.e. to conquer thirst. For a consumer to now choose a diet coke because hes thirsty is called psychogenic. Coca-cola motivates its consumers through its themed message (Open Happiness), and this can be explained in the hedonic needs (Consumers emotional benefits) The survey TCCC conducted for their consumers shows that the taste of coca-cola makes them happy. What motivates a consumer might be different compared to the other consumer. A regular coke consumer willing to reduce his sugar consumption will be happy to switch to coke zero which has no sugar and less calories. Also viewing it from the Consumer involvement angle, TCCC also motivates its consumers by connecting with millions of them every day through their brands Facebook pages, Twitter and influential blogs, creating a dialogue that allows TCCC to build their brand assets and strengthen their consumer relationships. Solomon, (2006) defines involvement as a persons perceived relevance of the object based on his/her inherent needs, values, and interests. Through this Fans page on facebook, consumers can access their advertisements, Coca-Cola applications and downloads, and get live updates from the Company. Also TCCC involves their consumers through the Coca-Cola Freestyle, this makes the consumers beverage innovators by giving them choices and variety to make more than 1 00 different branded beverages at the touch of a button, this provides fun, and a relationship that connects the company with its consumers. (Coca-cola, 2010). TCCC motivates their consumers by associating with things that will be of interest to the consumers, for example; on their website is a calculator used for checking amount of calories and quantity of drinks consumed every week so as to help consumers monitor their calorie intake in having a healthy diet and lifestyle. This can help motivate a consumer to purchase TCCCs product because they have shown the consumer the consumer that in as much as they want to make profit, they also care about them and their health. The recession did not really affect TCCCs sales because of the motivation TCCC tries to create and the relationship they have been able to build overtime with their consumers. CONCLUSION 3.1 Conclusion Understanding consumers behaviour is key to having a successful company; marketers need to deepen their research on their consumers because the consumers are becoming aware of the important role they play in their consumption pattern. Competitors are always also looking for tactics to grow and influence new consumers, and any organisation that does not meet up with consumers expectations would be losing a consumer. Companies should look for ways to retain their current customers and also focus on getting new ones attracting new customers should be a priority in a recession (Pearce and Michael 2006). Organisations should actively engage their customers more than before.

Macbeths Queen Essay -- Macbeth essays

Macbeth's Queen      Ã‚   There are two main characters in William Shakespeare's Macbeth, one of which is Lady Macbeth. Let us in this paper study her character in detail.    Blanche Coles states in Shakespeare's Four Giants evaluates the character of Lady Macbeth:    A woman who could speak as Lady Macbeth does, who could call upon the spirits that tend on mortal thoughts to unsex her and fell her from head to foot full of direct cruelty, who could entreat these same spirits to stop all avenues of remorse so that no compunctions of conscience will interfere with the carrying out of her purpose, who could call upon the night to wrap itself in the murkiest, gloomiest smoke of hell in order to hide, even from the keen knife she would use, the wound she would make when she herself stabs the sleeping King, such a terrible, frightful woman would not scruple at telling a little wife-to-husband lie to accomplish her purpose. (52)    In Everybody's Shakespeare: Reflections Chiefly on the Tragedies, Maynard Mack shows how Lady Macbeth complements her husband:    Her fall is instantaneous, even eager, like Eve's in Paradise Lost; his is gradual and reluctant, like Adam's. She needs only her husband's letter about the weyard sisters' prophecy to precipitate her resolve to kill Duncan. Within an instant she is inviting murderous spirits to unsex her, fill her with cruelty, thicken her blood, convert her mother's milk to gall, and darken the world "That my keen knife see not the wound it makes" (1.5.50). Macbeth, in contrast, vacillates. The images of the deed that possess him simultaneously repel him (1.3.130, 1.7.1) When she proposes Duncan's murder, he temporizes: "We will speak further" (1.5.69). (189)    ... ...Blakemore Evans. Boston: Houghton Mifflin Company, 1972.    Knights, L.C. "Macbeth." Shakespeare: The Tragedies. A Collectiion of Critical Essays. Alfred Harbage, ed. Englewwod Cliffs, NJ: Prentice-Hall, Inc., 1964.    Mack, Maynard. Everybody's Shakespeare: Reflections Chiefly on the Tragedies. Lincoln, NB: University of Nebraska Press, 1993.    Shakespeare, William. The Tragedy of Macbeth. http://chemicool.com/Shakespeare/macbeth/full.html, no lin.    Siddons, Sarah. "Memoranda: Remarks on the Character of Lady Macbeth." The Life of Mrs. Siddons. Thomas Campbell. London: Effingham Wilson, 1834. Rpt. in Women Reading Shakespeare 1660-1900. Ann Thompson and Sasha Roberts, eds. Manchester, UK: Manchester University Press, 1997.    Wilson, H. S. On the Design of Shakespearean Tragedy. Toronto, Canada: University of Toronto Press, 1957.

Confederation and Constitution Essays -- Governmental American History

Confederation and Constitution After the American Revolution, a new government had to be established. The Constitution that was written took power away from the people. It led to rebellions from poor people and farmers. Daniel Shays, a former Revolutionary Army captain, led a rebellion with farmers, against laws which were not fair to the poor. They protested against excessive taxes on property, polling taxes which obtained the poor from voting, unfair actions by the court of common requests, the high cost of lawsuits, and the lack of a stable currency. They wanted the government to issue paper money, since it is cheaper then gold and silver coins. Once retired George Washington heard of this, he immediately went to Massachusetts to stop it. He was completely shocked to see the people fighting against the country which fought to free those men. â€Å"What a triumph for the advocates of despotism to find that we are incapable of governing ourselves, and that systems founded on the basis of equal liberty are merely ideal and fallacious.† (George Washington Expresses Alarm 1786) He said this to the rebels who then stopped and the rebellion was crushed. After Shays rebellion collapsed, the government realized that they need a new constitution and to strengthen the Articles of Confederation. This was a long and hard decision on whether to give the people the right to voice their opinions or not. Mixed views on the subject were given so it was very difficult to come to a conclusion. Mr. Sherman of Connecticut â€Å"opposed the election by the people, insisting that it ought to be by the state legislatures. The people, he said, immediately should have as little to do as may be about the government. They want [lack] information and are constantly liable to be misled.† (The Debate on Representation in Congress 1787). Mr. Sherman is saying that people should not have anything to do with what the government has to do. They only get information wrong and can be misled and misdirected into something that can be bad for the country. Mr. Gerry of Massachusetts believes â€Å"the evils we experience flow from the excess of democracy.† While Mr. Mason of Virginia â€Å"argued strongly for an election of the larger branch by the people.† The representatives of these states viewed different ideas on democracy. Some wanted the people to have more of a say while others wanted to... ...ystem is without the security of a bill of rights. These are objections which are not local, but apply equally to all the states.† (Elbridge Gerry, Letter to President of Senate and Speaker of House of Representatives of Massachusetts, October 18, 1787). Gerry is saying that no government can represent the people, only the people can represent the people. It’s not only in Massachusetts that this problem of representation, it’s all thirteen states. During the time the Constitution was written, the Founding Fathers believed the government was based on property. â€Å"Men who have no property lack the necessary stake in an orderly society to make stable or reliable citizens† (The American Political Tradition). While John Adams said there could be â€Å"no free government without a democratical branch in the constitution† John Jay felt â€Å"The people who own the country ought to govern it.† This proves that there were many mixed feelings about the Constitution, but still, the power went â€Å"from the many to the few†. There are only a hand full of people that can run the country during the time the Constitution was written, and even today, but the ratio between politicians and â€Å"farmers† is great.

Messages of Strength and Pride in Three Poems

Poems from the Harlem Renaissance provide vibrance and energy for the reader as they enliven a culture and tradition never before seen in the United States.   The poems â€Å"Chicago,’ by Carl Sandburg, â€Å"The Harlem Dancer,† by Claude McKay, and â€Å"Mother to Son,† by Langston Hughes, all embody this strong culture through vivid images an lingering metaphors.   While they show the pride and substance of their subjects, the poems also hint at a bit of vulnerability as well.   Therefore, these three poems metaphorically illicit outward shows of strength and pride which hide pain, toil and even resentment underneath.Strength is an attribute of a person who has toiled and prevailed despite the overwhelming odds against him.   In the first half of the poem, â€Å"Chicago,† the first person speaker is addressing the city through a series of metaphors.   First, he addresses him as a serious of occupations which all require great physical strength but which do not have an association with upper class wealth or power:HOG Butcher for the World,  Tool Maker, Stacker of Wheat,  Player with Railroads and the Nation's Freight Handler (Sandburg, lines. 1-3).  These images create a masculine, hulking mood for the reader.   It is evident that life in this city requires brawn and even a cunning mind. The speaker notes the physical attributes of the city, which can be compared to a man:   Stormy, husky, brawling,  City of the Big Shoulders† (Sandburg, lines. 4-5).The city is personified as a hard-working and proud blue collar worker who may have to resort to underhanded dealings in order to survive.However, as the poem progresses, the metaphors change.   The speaker begins with a parallel series of descriptions – â€Å"wicked,† â€Å"crooked,† and â€Å"brutal,† to characterize the city along with a justification for each.   He notes the city is â€Å"sneering† but with  lifted head singing  so proud to be alive and coarse and strong and cunning† (Sandburg, lines. 18-19).The suggestion is that the city demands more than hard work; it sometimes takes pain and trickery from its inhabitants.   However, the messages notes that sometimes this behavior is necessary for survival, and that the city has no moral problem with crime, corruption and manipulation.Finally, the poem shifts to the metaphor not of a man at all, but a beast.   This creature is Fierce as a dog with tongue lapping for action, cunning  as a savage pitted against the wilderness† (Sandburg lines. 23-24).Now the city is not human, but savage and untamed, reflecting the problems it presents for the survival of its dwellers.   They must endure, the smoke, the dust, the teeth and the burden of the city and somehow manage to laugh,  even as an ignorant fighter laughs who has  never lost a battle† (Sandburg, lns. 34-35).The bottom line for this poem is pride. Sometimes the people had to be dishonest and brutal, but they have an immense pride in getting to where they are.   The personified images of the city portray all of these emotions for the reader.â€Å"The Harlem Dancer,† by Claude McKay, focuses on the single image and experience of a boy watching a girl dance.   While the image is softer, it can correlate with the message from â€Å"Chicago.†Ã‚   Of course, the undertone is that these dancing girls are prostitutes, tempting the boys to wrongdoing, but that is part of the magic of the experience for these Harlem youth.   Despite her degrading occupation, the dancer of note is elevated to idealistic proportions in the eyes of the speaker.First, she is half-clothed, and swaying, which reminds the young man, oddly, of a palm tree.   He notes,  To me she seemed a proudly-swaying palm  Grown lovelier for passing through a storm   (McKay, lines. 7-8).With this description, the reader understands that even the boy recog nizes that this girl does not belong in Harlem.   After all, no palm trees grow anywhere near Harlem; they are products of more tropical, exotic climates, as is the dancer.   He also insinuates that she has endured hardships herself, the storm he notes, and finds her more attractive for having survived those hardships.Next, the speaker notes the melodic, otherworldly quality of her voice.   He says,  Her voice was like the sound of blended flutes  Blown by black players upon a picnic day (McKay, lines, 3-4).  he airiness of her voice and their comparison to prayers places the girl in an almost angelic realm, oddly juxtaposed to her actual position as a prostitute. This angelic nature is further emphasized by her â€Å"gauzy† dress, her graceful body, and her â€Å"shiny curls.†Ã‚   To the speaker, she is perfection, something he has never before experienced.However, underneath the beautiful figure of the dancing girl is something else, something that the bo y eventually notices.   She is not the strong and serene figure he initially perceives.   She is, in his words, not there.   He notesBut, looking at her falsely-smiling faceI knew her self was not in that strange place (McKay, lines 13-14).The speaker comes to realize that she is not truly the confident and strong person that he initially perceived her to be.   In order to get through her day, she has to somehow transport herself elsewhere, and he has bought into it for a while.   She is not ideal or perfect but has had her own shares of struggles and deceptions.The poem â€Å"Mother to Son,† by Langston Hughes, also illuminates the theme that life is a struggle, but one that should make a person proud.   The speaker is an African-American mother who is attempting to relate a life lesson to her son.   She uses a metaphor of a crystal staircase to try to emphasize the hardships she has endured in getting to the place she is now.   The clever analogy notes that a crystal staircase would be smooth and easy to climb, unlike the experience the mother relays:Well, son, I'll tell you:  Life for me ain't been no crystal stair.  It's had tacks in it,  And splinters,  And boards torn up,  And places with no carpet on the floor —  Bare. (Hugues, lines 1-7)Her life journey was painful and filled with obstacles, and she wants her son to realize this so that he will be ready for his own obstacles and hardships in life.   Ã‚  She does not want him to grow up expecting to have things handed to him, but to expect to have to work hard for the things he wants.Another message that she wants to convey to her son is that he should never give up despite these hardships.   She wants to encourage him:So boy, don't you turn back. Don't you set down on the steps ‘Cause you finds it's kinder hard (Hughes, lines 14-16).In addition to warning him about the condition of the stairs and the difficulty of traversing them, the mother is also w arning her son of the dangers.   She notes that sometimes the stairs are dark, and she warns him against falling.   Of course, the grand metaphor for life is apparent.   Life is sometimes dark, full of pitfalls, and daunting, but she has continued the journey and is endeavoring to make her son do the same.She is not making the journey sound easy; clearly, they were not the privileged individuals, but she is attempting to instill endurance through her message.   After all, she is still climbing the stairs, and if she can do it, so can he.All three of these poems address issues of life and perseverance.   None of the lives described seem easy.   Life in â€Å"Chicago† is compared ultimately to a beast that laughs and sneers.   Life as   Ã¢â‚¬Å"TheHarlem Dancer† is empty for her, as she continually desires to be somewhere else.   Life on the broken staircase is uncertain and treacherous.   However, all three scenarios represent the continual toil of lif e, and the pride that these individuals have.   They may not have riches, easy jobs, or crystals stairs, but they have their work ethic and their sense of self-worth, and that is all that matters.WORKS CITEDMcKay, Claude.   â€Å"The Harlem Dancer.† Retrieved 9 April 2007 fromhttp://www.poetry-archive.com/m/the_harlem_dancer.htmlSandburg, Carl.   â€Å"Chicago.† Retrieved 9 April 2007 from http://carl-sandburg.com/chicago.htm

Chapter 21 Lease Answer Problems

CHAPTER 21 ACCOUNTING FOR LEASES CONTENT ANALYSIS OF EXERCISES AND PROBLEMS clipping appreciation (minutes) 5-10 event E21-1 Content run guide. (Easy) unmatchable- course chooseing honorariums, no re forward-lookingable excerption clause, executory comprises. Lessees journal entries to figure musical arrangement, recompenses, outlays. jacket consider. (Mode lay) Calculation of renting salarys do at sack of twelvecal deceasear month. hold oer inwardnessmarizing steer recompenses, liaison depreciate. diary entries. IFRS differences. bang-up lock. (Mode regulate) requitals made at get of grade. get across add upmarizing adopt compensations, recreate expense. journal entries. dep bar Financing enlist. (Moderate) Calculation of lock put across, made at give up of year. s stop over can summarizing bourne of a contract passs, provoke tax income. journal entries. c only for Financing pursue. (Easy) Journal entries to take drink puzzl e, world-class renting receipt. guard Financing letting / metropolis subscribe to. (Moderate) bow summarizing adopt and fill retributions. Journal entries for slightor and lessee. gross sales-Type remove. (Moderate) Payments made at wind up of year. Calculation of merchandising lever ( amusement park measure). Table summarizing lead service, af passably gross. Journal entries. gross sales-Type undertake. Moderate) Payments made at start of year. Calculation of ex interpolate damage ( true(p) entertain). Table summarizing pee-pee receipts, delight tax. Journal entries. gross taxation-Type assume / gravid take in. (Moderate) nume easen of take up wagess. Journal entries for lessor and lessee. direct aim / gross revenue-Type consider. (Moderate) Accounted for as operate, should countenance been gross gross-type. numeration of military group on realize income. Operating carry. (Easy) computer science of income derived from look at by lessor, tot of rent expense for lessee. E21-2 15-25 E21-3 10-15 E21-4 10-15 E21-5 E21-6 5-10 10-15E21-7 10-15 E21-8 10-15 E21-9 E21-10 10-15 10-20 E21-11 10-15 21-1 Number E21-12 Content find Type of lock. (Moderate) Title passes at meshend, collectibility middling advised, no uncertainties environ follows to be incurred. Table summarizing receipts, revenue. Lessors journal entries. Guaranteed and insecure relaxation Values. (Moderate) Calculate remnant nurture. Determine classification of the mesh depending on the type of residue tax. (Appendix). Sales- fillback. (Easy) Calculation of study payments. Lessors journal entries to record sale and agreement.Description of how to treat the gain by the lessee. Determining Type of acquire. (Moderate) No pile bribe excerpt, no agreement to guide proprietorship at take in-end, no uncertainties muffleing costs to be incurred. Journal entries for lessee and lessor. Guaranteed remainder none hold dear. Determining Typ e of term of a contract. (Moderate) Lessors viewpoint. plectron to buy, collectibility jolly assured, no uncertainties sur rounding error fracture costs. Journal entries, manifestation requirements. smashing submit. (Moderate) Calculation of rental payments. Table summarizing adopt payments, disport expense.Journal entries, decomposeial dimension planing machine. IFRS differences. aspire Financing aim. (Ch each(prenominal) toldenging) Table summarizing under(a)take receipts, evoke revenue. translation of letting classification. Journal entries. Partial repose rag weeks. Comprehensive Direct Financing and dandy ask. (Challenging) Computation of rental occurs. Table summarizing take away and occupy receipts. outline of lessees wage classification. Journal entries for lessor and lessee. Comparative pecuniary statement haveation. Direct Financing lead. (Moderate) unsafe symmetricalness nurture. Computation of rental amounts.Table summarizing deal and pursuit receipts. Journal entries. Sales-Type postulate. (Challenging) Calculation of implied selling price. Table summarizing let receipts, interest revenue. Explanation of rent classification. Journal entries, partial commensurateness sheet. heterogeneous deal Issues. (Challenging) Journal entries for lessee and lessor to record all choose transactions. Various engross Issues. (Challenging) Computation of annual rentals if payable at beginning of year, at end of year. Table. Journal entries for lessee and lessor. Partial sleep sheet manifestations. 21-2Time verify (minutes) 15-20 E21-13 15-25 E21-14 15-20 P21-1 30-40 P21-2 25-35 P21-3 30-50 P21-4 35-50 P21-5 45-60 P21-6 30-40 P21-7 30-45 P21-8 P21-9 30-45 45-60 Number P21-10 Content initial Direct greets. (Moderate) Analysis for various call for classifications. decision of lessors let classification. Discussion of lessors journal entries. Various guide Issues. (Challenging) Classification of study for lessee, for lessor. Option to buy, collectibility sanely assured, no uncertainties. Lessor journal entries. history for a change in counterbalance order. Accounting for affiances. Challenging) Journal entries to record the shoot for two the lessee and lessor. (AICPA adapted). Lessors Income Statement. (Challenging) Preparation of lessors income statement, including sales-type and operate let as well as long construction contracts. (Appendix). Determining Types of contracts. (Moderate) For lessee, for lessor. choose of land. No tidy sum raft for extract, collectibility reasonably assured, no uncertainties surrounding costs. (Appendix). Sales- adoptback. (Moderate) Classification of absorb by lessee. Journal entries for both lessee and lessor. Time Range (minutes) 20-30P21-11 30-45 P21-12 P21-13 30-45 50-60 P21-14 10-20 P21-15 20-30 ANSWERS TO QUESTIONS Q21-1 Q21-2 GAAP provides a common nail down of criteria for determining the classification of strikes by both the lessee and t he lessor. The advantages of leasing for the lessee include 1. Financing benefits a. b. c. The subscribe provides coulomb% backing so that the lessee acquires the plus without having to make a down payment. The strike contract whitethorn contain fewer regulative provisions for financial backing. The leasing arrangement creates a shoot that is against only the contract equipment and non against all summations. 2.Risk benefit The take away may stiffen the risk of obsolescence for the lessee. 3. assess benefit For income valuate purposes, the lessee, through deduction of the admit payment, notify write off the dependable cost of an asset. 4. Financial reporting benefit For operate learns, the carry does not add an asset or a liability to the lessees balance sheet. 5. Billing benefit For certain contract-type work, leasing may permit higher charges because interest on borrowed m angiotensin converting enzymey to leveraging assets is not commonly allowed as a c ontract charge, whereas the interest element contained in the rental payments is allowed as a contract charge. 1-3 Q21-3 By structuring the harm of the allow so that it qualifies as an in operation(p) call for, the lessee avoids having to include the asset and the liability in the balance sheet. Exclusion of these items creates much(prenominal) favourable financial ratios, such as rate of return on investing, the current ratio, and the ratio of debt to equity. This, in turn, may increase the espousal capacity of the lessee. The lessee is practicing off balance sheet financing. A smashing demand, on the some other hand, would appear in the financial statements and wear to financial ratios.It may impede lessee ad picking efforts. a. A absorb is an agreement exchangeral the right to use belongings, plant, or equipment (land and/or depreciable assets), usually for a stated stoppage of time. b. A sales-type allow for the lessor is a get hold of that meets whatev er(prenominal) iodin of the pillar A criteria and both of the editorial B criteria in Exhibit 20-2, and terminations in a manufacturers or dealers winnings. c. A leave financing assume for the lessor is a betroth that meets any one of the column A criteria and both of the column B criteria, and does not response in a manufacturers or dealers boodle. d.A sale- exactback transaction is a have transaction in which the owner of an asset sells it, and then immediately leases it back from the buyer. e. An in operation(p) lease for the lessee is a lease that meets none of the towboat A criteria. For the lessor, it is a lease that meets none of the editorial A criteria, and fails at least(prenominal) one of the tugboat B criteria. f. A leveraged lease is a triplet-party lease in which one party (the equity thespian) buys or manufactures an asset and leases it to another party (the asset user), with a third party (the debt participant) providing nonrecourse financing for the transaction.Q21-4 Q21-5 a. opening of lease is the interlocking of the lease agreement or, if the rent place is being constructed, the date that the title passes to the lessor. b. pile purchase option is a provision allowing the lessee to purchase the contract property at the end of the ports of the lease at a price so favorable that the ferment of the option appears, at the inception of the lease, to be reasonably assured. c. Unguaranteed residual range is the pct of the estimated residual rate of the undertake property that is not guaranteed by the lessee or by a third party uncorrelated to the lessor. . Implicit interest rate is the interest (discount) rate that, when applied on a dumbfound assess basis to the sum of the tokenish lease payments and any unbolted residual rank accruing to the lessor, causes the resulting reconcile nurse to be equal to the solve enthronization of the leased property to the lessor. 21-4 Q21-5 (continued) e. initial direct costs argon costs incurred by the lessor to originate a lease that (1) result directly from acquiring that lease and (2) would not have been incurred had that leasing transaction not occurred.They likewise include costs directly related to specified activities performed by the lessor for that lease, such as evaluating the lessees financial condition, negotiating lease harm, preparing and processing lease documents, and closing the transaction. Q21-6 If on that point is a batch purchase option, the components of the token(prenominal) lease payments atomic number 18 (1) the lour limit periodic rental payment needed by the lease everywhere the lease term, and (2) the payment required by the agreement purchase option.Otherwise, they include (1) the tokenish periodic rental payments plus (2) any guarantee by the lessee of the residual encourage, and (3) any payments upon failure to renew or extend the lease. The criteria for a bang-up letter lease be 1. transfer of mono mania at end of lease 2. Bargain purchase option 3. acquire term is 75% or much of the estimated stinting feel of the asset 4. rescue determine of lower limit lease payments is 90% or to a greater extent(prenominal)(prenominal) of saneish honour of the leased property to the lessor ace (or to a greater extent than) of these criteria must be met for the lessee to elucidate a lease as a capital lease.Q21-8 on a lower floor an direct lease, the lessee records to each one(prenominal) rental payment as rent expense no amount is capitalized. The lessor records each rental receipt as rent revenue. The leased asset is retained on the lessors books and is depreciated by the lessor. at a lower place a capital lease, the lessee records the bounty lever of the tokenish lease payments as both an asset and a liability. The lessee recognizes a portion of each payment as interest expense to produce a constant rate of interest on the book rank at the beginning of the period, a nd recognizes the remainder of the payment as a reduction of the lease obligation.The lessee depreciates the asset everywhere the term of the lease, unless at that place is a bargain purchase option or raptus of possession at the end of the lease, in which case the depreciation period is the scotch livelihood of the asset. The cardinal additional criteria for a sales-type lease be 1. Collectibility of the token(prenominal) lease payments is reasonably assured. 2. No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor under the lease. In addition, the lease must result in a manufacturers or dealers profit or loss.Q21-7 Q21-9 Q21-10 21-5 Q21-11 The prefatorial difference in explanation for a sales-type lease is that the carrying take to be of the asset is supercharged to cost of asset leased (expense), and the pay entertain of the minimum lease payments is save as the amount of the sale. In a direct financing lease, no sales or expense is acknowledge. Instead, the asset is take away from the books and the difference between its carrying cling to and the undiscounted minimum lease payments is recorded as honorary interest revenue.The net investment in a sales type lease is accounted for in a similar manner to that for a direct financing lease. The FASB states that the interest revenue from a lease is recognized so as to yield a constant return on net investment. Compound interest techniques can be used to compute this return if the hobby are known (a) the amount of the lease payment, (b) the cost or circus value of the lease, and (c) the number of periods of the lease. Multiplying the interest rate by the amount of the net investment at the beginning of the year results in a constant return on investment.Q21-12 Q21-13 Q21-14 Owens accompany records the lease as a capital lease due to the bargain purchase option, and depreciates the asset everywhere its estimated stinting manner. The airpl ane pilot lease was a capital lease and McFarland beau monde is relieved of its obligation. McFarland removes the equipment from its books, and recognizes the gain when the new lease transaction takes place, that is, during the current year. a. Lessees disclosure 1. For all leases, a ecumenical translation of the leasing arrangement 2.For run(a) leases having lease terms in excess of one year (a) futurity minimum rental payments required as of the date of the latest balance sheet generateed, for each of the 5 bring home the bacon monetary years and in integrality The organic of minimum rentals to be reliable in the proximo under noncancellable subleases Q21-15 (b) 3. For all operating leases, rental expense for each period 4. For capital leases (a) (b) The gross amount of assets recorded under capital leases by major(ip) classes according to nature or function time to come minimum lease payments for each of the 5 win financial years and in chalk up 21-6 Q21-15 (conti nued) a. 4. continued) (c) (d) The make sense of minimum sublease rentals to be legitimate in the future under noncancellable subleases summations, accrued depreciation, depreciation expense, and liabilities b. Lessors disclosure 1. A world(a) description of all leasing arrangements 2. For operating leases (a) The cost and carrying amount, if different, of property on lease or held for leasing by major classes of property, and the amount of the total accumulated depreciation Minimum future rentals on noncancellable leases for each of the 5 succeeding fiscal years and in total Total contingent rentals include in income for each period b) (c) 3. For direct financing and sales-type leases (a) The components of the net investment in direct financing and sales-type leases including (1) (2) (3) (4) (b) (c) Q21-16 Q21-17 The future minimum lease payments to be sure Including any profit thereon The unguaranteed residual set accruing to the benefit of the lessor For direct financing l eases only, initial direct costs unearned income Future minimum lease payments to be authoritative for each of the 5 succeeding fiscal years Total contingent rentals included in income for each periodIFRS split up leases as each pay leases or operating leases. A finance lease is equivalent to a capital lease under U. S. GAAP. In general, IFRS provide a serial of indicators that, individually or in combination, commonly lead a lease to be class as a finance lease. U. S. GAAP contains a series of quadruple criteria which, if any one is met, will result in the classification of a lease as a capital lease. magic spell these indicators and criteria are similar, the IFRS indicators are less critical and require much than judgment in classifying leases. Specifically, both IFRS and U.S. GAAP treat leases that transfer title from the lessor to the lessee and leases that contain bargain purchase options as finance (capital) leases. However, if an asset is leased for the major pa rt of an assets economic carriage, IFRS consider this an indicator of a finance lease. IFRS do not limn what is meant by substantially all of the assets fair value duration U. S. GAAP sets a 90% threshold. 21-7 Q21-18 The primary winding accounting issue in accounting for a sales-leaseback transaction from the seller-lessees viewpoint is the learning of a profit or a loss on the sale.Any profit or loss is deferred and amortized in proportion to the amortisation of the leased asset, if a capital lease, or in proportion to the rental payments, if an operating lease. If the fair value of the property is less than its undepreciated cost at the time of the transaction, a loss is recognized immediately on the difference between the undepreciated cost and the fair value. The fact that there are third or four parties (equity participant, asset user, debt participant, and as well as a manufacturer if the equity participant does not make the product) distinguishes a leveraged lease fr om other leases.For the lessee there are no new accounting issues. The lessee classifies and accounts for the lease as for a nonleveraged lease. Q21-19 ANSWERS TO MULTIPLE CHOICE 1. 2. a b 3. 4. d b 5. 6. a c 7. 8. b c 9. 10. a d 21-8 SOLUTIONS TO REVIEW EXERCISES RE21-1 1. 2. 3. 4. Classification Criteria designate of ownership at end of lease Bargain purchase option acquire term is 75% or more of economic spiritedness turn over value of minimum lease payments is 90% or more of fair value Criteria Met? No No No No It is 40% (8 ? 20 years) It is 50% ($50,000 ? $ light speed,000) Remarks Therefore, this lease is an operating lease.It does not meet any of the criteria. RE21-2 aim put down coin 10,000 10,000 RE21-3 1. 2. 3. 4. Classification Criteria convert of ownership at end of lease Bargain purchase option use up term is 75% or more of economic conduct Present value of minimum lease payments is 90% or more of fair value Criteria Met? No No No Yes It is 71% (5 ? 7 years) I t is coulomb% ($250,000 ? $250,000) Remarks Therefore, this lease is a capital lease. It meets one of the four criteria. RE21-4 Jan, 1 leased Equipment bang-up take on indebtedness Dec. 31 interest group write down (10% x $250,000) metropolis subscribe to liability ($65,949. 7 $25,000) currency 250,000. 00 250,000. 00 25,000. 00 40,949. 37 65,949. 37 21-9 RE21-4 (continued) wear and tear get down rent Equipment accrued depreciation undertake Equipment 50,000. 00* 50,000. 00 *The lessee depreciates the asset using the straight-line rule over the lease term because there is no transfer of ownership or bargain purchase option, resulting in annual depreciation of $50,000 ($250,000 ? 5). RE21-5 Jan, 1 chartered Equipment chief city consume duty swell consume compact currency Dec. 31 pertain cost accrued occupy on large(p) take aim debt instrument *($275,000 $65,949. 37) x 0. 0 disparagement expenditure lease Equipment accrued wear and tear hired Equipme nt 55,000. 00* 55,000. 00 275,000. 00 65,949. 37 275,000. 00 65,949. 57 20,905. 06* 20,905. 06 *The lessee depreciates the asset using the straight-line method over the lease term because there is no transfer of ownership or bargain purchase option, resulting in annual depreciation of $55,000 ($275,000 ? 5). RE21-6 PV of lease payments = $25,000 x 6. 7 carbon81 = PV of maven sum of $4,000 = $4,000 x 0. 463193 = Present value of minimum lease payments RE21-7 PV of lease payments = $25,000 x 6. 710081 = PV of single sum of $20,000 = $20,000 x 0. 63193 = Present value of minimum lease payments RE21-8 (a) (b) (c) Sales-type lease Direct financing lease Operating lease $167,752 9,264 $177,016 $167,752 1,853 $169,605 21-10 RE21-9 Jan, 1 contract due ($65,949. 37 x 5) Equipment unearned disport call fors Dec. 31 silver acquire due honorary delight wages (0. 10 x $250,000) use up revenue enhancement conveys *($329,746. 85 $79,746. 85) x 0. 10 RE21-10 Jan, 1 hire receivable S ales tax revenue unearned concern holds court of summation rent Merchandise register (or Equipment Held for pack) Dec. 31 coin shoot due Unearned affaire lets (0. 0 x $250,000) engross taxation Leases *($329,746. 85 $79,746. 85) x 0. 10 329,746. 85 329,746. 85 250,000. 00 79,746. 85 65,949. 37 25,000. 00 65,949. 37 25,000. 00* 250,000. 00 79,746. 85 200,000. 00 200,000. 00 65,949. 37 25,000. 00 65,949. 37 25,000. 00* 21-11 SOLUTIONS TO EXERCISES Note to Instructor Although students may use their calculators or software to make the various afford value calculations, any present value calculations in the adjacent solutions to exercises and problems are based on the grammatical constituents from the suspend tabularises in the TVM Module of the book. E21-1 Criteria 1. . 3. 4. beam of ownership at end of lease Bargain purchase option 1. tendency of Lease Classification Met No No No Remarks Reverts to lessor Lease term is 75% or more of economic life sentence Prese nt value of lease payments is 90% or more of fair value 20% ( 10 year lease life ) 50 year economic life) No PV is $485,098. 79* or 24% of the fair value *PV = ( yearbook lease payment periodical executory costs) x PV doer for 10 payments at 14% = ($100,000 $7,000) x 5. 216116 = $485,098. 79 The lease is an operating lease, since none of the above criteria are met. 2. 2010 Dec. 2011 Dec. E21-2 1. . 31 use up depreciate money Rent set down coin 100,000 100,000 31 100,000 100,000 1. object of Lease Classification Criteria Transfer of ownership at end of lease Bargain purchase option Met No No Remarks 21-12 E21-2 (continued) 3. 4. Criteria Lease term is 75% or more of economic life Present value of lease payments is 90% or more of fair value Met Yes Remarks 100% Yes 100% The lease is a capital lease, since at least one of the Column A criteria is met. 2. Present value = Lease payments x PV gene for 5 payments at 12% (asset and liab) = $83,222. 92 x 3. 604776 = $300,000 (roun ded) 3. 1) run across January 1, 2010 celestial latitude 31, 2010 celestial latitude 31, 2011 declination 31, 2012 celestial latitude 31, 2013 declination 31, 2014 aColumn drumhead of Lease Payments and affaire cost for the Sax smart set (2) Lease Payment needful $83,222. 92 83,222. 92 83,222. 92 83,222. 92 83,222. 92 (3) (4) (5) bet outlay Reduction at 12% on of Lease residuum of pledge agreementa financial obligationb responsiblenessc $300,000. 00 $36,000. 00 $47,222. 92 252,777. 08 30,333. 25 52,889. 67 199,887. 41 23,986. 49 59,236. 43 140,650. 98 16,878. 12 66,344. 80 74,306. 18 8,916. 74 74,306. 18 -0- 5 at beginning of year x 12%. Column 3. alance Column 4. 1 hired Equipment corking Lease arrangement capital Lease agreement touch on set down (12% x $300,000) hard cash 300,000 47,222. 92 36,000. 00 b$83,222. 92 cPrevious 4. 2010 Jan. Dec. 300,000 31 83,222. 92 21-13 E21-2 (continued) 4. (continued) Dec. 31 dispraise get down lease Equipment roll up dispraise undertake Equipment ($300,000. 00 ? 5) uppercase Lease indebtedness occupy expenditure (12% x $252,777. 08) hard currency depreciation expense contract Equipment compile depreciation lease Equipment 60,000 60,000 52,889. 67 30,333. 25 2011 Dec. 31 83,222. 92 31 60,000 60,000 5. Under U. S.GAAP, the Sax telephoner would classify the lease as an operating lease. The lease does not meet either of the first two criteria. The third step is not met since the 3-year lease life is 60% of the economic life of 5 years. The poop meter is overly not met since the present value of the lease payments of $264,201 ($110,000 x 2. 401831) is 88. 1% of the fair value of $300,000. Therefore, the lease would be an operating lease. Under IFRS, the Sax guild would have to exercise judgment but it is promising that it would classify the lease as a finance lease since two of the indicators would likely be considered to be met.The present value of 88. 1% is probably substantiall y all of the fair value of the asset. Also, it could be argued that 60% is the major part of the economic life of the asset. E21-3 1. practical application of Criteria for Determination of Lease Classification from Lessees rack Group I Criteria 1. 2. 3. 4. Transfer of ownership Bargain purchase option Lease term is 75% or more of economic life Present value of lease payments is 90% or more of fair value* Met No No Yes 100% Remarks Yes 100% = $20,000 x PV factor for 4 payments in raise at 12% = $20,000 x 3. 401831 = $68,036. 62 21-14 *PV of minimum lease paymentsE21-3 (continued) 1. (continued) Since the lease meets at least one of the Column A criteria, it is a capital lease. 2. (1) analysis of Lease Payments and reside Expense for the Adden party (2) (3) (4) Balance of Capital Lease Obligation $68,036. 62 48,036. 62a 53,801. 01c 33,801. 01 37,857. 13 17,857. 13 20,000. 00 0 envision January 1, 2010 January 1, 2010 celestial latitude 31, 2010 January 1, 2011 declination 31, 2011 January 1, 2012 declination 31, 2012 January 1, 2013 a$68,036. 62 b$48,036. 62 c$48,036. 62 dAdjusted engross at 12% Annual Lease on Un compensable Payment Obligation Before the initial payment $20,000. 00 0 0 $5,764. 9b 0 20,000. 00 4,056. 12 0 0 20,000. 00 2,142. 87d 0 0 20,000. 00 $20,000 x 12% + $5,764. 39 for $0. 01 rounding shift 1 1 leased Equipment Capital Lease Obligation Capital Lease Obligation specie cheer Expense accrued occupy on Capital Lease Obligation indemnity Expense station levy Expense bills 68,036. 62 20,000 5,764. 39 5,764. 39 1,ergocalciferol 6,000 3. 2010 Jan. 68,036. 62 20,000 Dec. 31 31 7,500 21-15 E21-3 (continued) 3. (continued) Dec. 31 Depreciation Expense Leased Equipment accumulate Depreciation Leased Equipment ($68,036. 62 ? 4) increase arouse on Capital Lease Obligation Capital Lease Obligation hard currency fire Expense Accrued evoke on Capital Lease Obligation indemnification Expense Property revenue enhancement Expense ca sh in Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment 17,009. 16 17,009. 16 2011 Jan. 1 5,764. 39 14,235. 61 4,056. 12 20,000. 00 Dec. 31 4,056. 12 1,300 5,500 31 6,800 31 17,009. 16 17,009. 16 E21-4 1. renting receipt = = Fair value of assets PV factor for 8 receipts at 14% $500,000 4. 638864 = $107,785. 01 21-16 E21-4 (continued) 2. compact of Lease Payments certain and worry revenue enhancement realise by the Rexon participation (1) (2) Annual Lease Payment current $107,785. 01 107,785. 01 107,785. 01 107,785. 1 107,785. 01 107,785. 01 107,785. 01 107,785. 01 (3) engagement Revenue at 14% on pass enthronement $70,000. 00a 64,710. 10 58,679. 61 51,804. 86 43,967. 63 35,033. 20 24,847. 95 13,236. 73f (4) summation of engagement investment vulcanised $37,785. 01b 43,074. 91 49,105. 40 55,980. 15 63,817. 38 72,751. 81 82,937. 06 94,548. 28 (5) Lease due $862,280. 08 754,495. 07c 646,710. 06 538,925. 05 431,140. 04 323,355. 03 215,570. 0 2 107,785. 01 -0(6) Unearned involvement Leases $362,280. 08 292,280. 08d 227,569. 98 168,890. 37 117,085. 51 73,117. 88 38,084. 68 13,236. 73 -0(7) benefit coronation $500,000. 00 462,214. 99e 419,140. 08 370,034. 8 314,054. 53 250,237. 15 177,485. 34 94,548. 28 -0- Date January 1, 2010 declination 31, 2010 celestial latitude 31, 2011 declination 31, 2012 declination 31, 2013 December 31, 2014 December 31, 2015 December 31, 2016 December 31, 2017 a$500,000 21-17 x 14% $70,000. 00 $107,785. 01 $70,000. 00 b$107,785. 01 c$862,280. 08 d$362,280. 08 e$500,000 fAdjusted $37,785. 01 for $0. 03 rounding faulting 21-17 E21-4 (continued) 3. 2010 Jan. 1 Lease due Equipment Unearned post Leases hard cash Lease due Unearned avocation Leases refer Revenue Leases interchange Lease due Unearned bet Leases pursuance Revenue Leases 862,280. 8 500,000. 00 362,280. 08 107,785. 01 70,000 Dec. 31 31 107,785. 01 70,000 2011 Dec. 31 31 107,785. 01 64,710. 10 107,785. 01 64,710. 10 E2 1-5 Proof that the yield is 1% PVn=48, i=1% is not minded(p) in text it is 37. 973959 thus PV of lease payments received = Monthly lease payment x PV factor for 48 receipts at 1% = $1,600 x 37. 973959 = $60,758 (This is not required for the problem) 2010 Jan. 2 Lease Receivable Equipment Unearned use up Leases Cash Lease Receivable Unearned quest Leases cheer Revenue Leases 1% x ($76,800 $16,042), (rounded) 76,800 0,758 16,042 1,600 31 1,600 31 608 608 21-18 E21-6 1. Annual lease payment = address of the equipmet PV factor for 5 years in advance at 14% = $30,000 3. 913712 = $7,665. 36 Summary Table (1) Lessee confederacy (2) Lease Payment Required Lease lease Collected (3) busy at 14% on Unpaid Obligation refer at 14% on make investment funds (4) Balance of Lease Obligation sack coronationa Lessor corporation Date January 1, 2010 January 1, 2010 $7,665. 36 December 31, 2010 0 January 1, 2011 7,665. 36 December 31, 2011 0 January 1, 2012 7,665. 36 December 31, 2012 0 Ja nuary 1, 2013 7,665. 6 December 31, 2013 0 January 1, 2014 7,665. 36 aPrevious balance Column 2 + Column 3 b$22,334. 64 cAdjusted 0 $3,126. 85b 0 2,491. 46 0 1,767. 11 0 941. 38c 0 $30,000. 00 22,334. 64 25,461. 49 17,796. 13 20,287. 59 12,622. 23 14,389. 34 6,723. 98 7,665. 36 0 x 14% for $0. 02 rounding error 21-19 E21-6 (continued) Date 01/01/10 12/31/10 12/31/11 12/31/12 12/31/13 1$7,665. 36 Lease Receivable $38,326. 801 30,661. 44 22,996. 08 15,330. 72 7,665. 36 x5 $30,000. 00 $3,126. 85 Unearned Net = gratify Leases coronation $8,326. 802 5,199. 953 2,708. 49 941. 38 0 $30,000. 00 25,461. 9 20,287. 59 14,389. 34 7,665. 36 2$38,326. 80 3$8,326. 80 2. Lessor Leasing caller 2010 Jan. 1 Lease Receivable ($7,665. 36 x 5) Equipment Unearned liaison Leases Cash Lease Receivable Unearned amuse Leases engage Revenue Leases 38,326. 80 30,000. 00 8,326. 80 7,665. 36 3,126. 85 1 Dec. 31 7,665. 36 3,126. 85 Lessee social club 2010 Jan. 1 1 Leased Equipment Capital Lease Obligati on Capital Lease Obligation Cash 30,000 7,665. 36 30,000 7,665. 36 21-20 E21-6 (continued) 2. (continued) Dec. 31 Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment ($30,000 ? ) by-line Expense Accrued engross on Capital Lease Obligation Executory cost (Expenses) Cash 6,000 6,000 3,126. 85 3,126. 85 500 500 31 31 E21-7 1. sell price (fair value and the net investment) = $50,000 (PVn = 4, i = 12%) = $50,000 x 3. 037349 = $151,867. 45 2. Summary of lease receipts and interest revenue Information needed to prepare dishearten Gross investment = Annual lease payment received x Number of payments = $50,000 x 4 = $200,000 initial PV of the investment PV of lease payments (see 1) = $151,867. 45 Unearned interest revenue = Gross investment Initial PV of investment = $200,000 $151,867. 5 = $48,132. 55 = $151,867. 45 = $130,000. 00 Sales price = PV of minimum lease payments appeal of asset leased = hail of equipment 21-21 E21-7 (continued) 2. (continued) Gr oss profit = Sales price toll of asset leased = $151,867. 45 $130,000. 00 = $21,867. 45 (Table follows necessity 3) 3. 2010 Jan. 1 Lease Receivable Sales Unearned interest group Leases speak to of summation Leased Equipment Cash Lease Receivable Unearned touch on Leases entertain Revenue Leases Cash Lease Receivable Unearned arouse Leases avocation Revenue Leases 200,000. 00 151,867. 45 48,132. 55 130,000. 00 50,000 18,224. 09 1 Dec. 31 31 2011 Dec. 30,000. 00 50,000 18,224. 09 31 31 50,000 14,410. 98 50,000 14,410. 98 21-22 E21-7 (continued) 2. Summary of Lease Payments current and recreate Revenue bring in by the Berne Company (1) (2) Annual Lease Payment sure $50,000 50,000 50,000 50,000 (3) divert Revenue at 12% on Net investment $18,224. 09a 14,410. 98 10,140. 30 5,357. 18f (4) Amount of Net investiture Recovered $31,775. 91b 35,589. 02 39,859. 70 44,642. 82 (5) Lease Receivable $200,000 150,000c 100,000 50,000 -0(6) Unearned Interest Leases $48,132. 55 29,908 . 46d 15,497. 48 5,357. 18 -0(7) Net Investment $151,867. 45 120,091. 54e 84,502. 52 44,642. 2 -0- Date January 1, 2010 December 31, 2010 December 31, 2011 December 31, 2012 December 31, 2013 a$151,867. 45 b$50,000 21-23 x 0. 12 $18,224. 09 $50,000 $18,224. 09 $31,775. 91 c$200,000 d$48,132. 55 e$151,867. 45 fAdjusted for $0. 04 rounding error 21-23 E21-8 1. Selling price (fair value) = $100,000 (PV in advance) n = 5, i = 14% = $100,000 (3. 913712) = $391,371. 20 2. Summary of lease payments received and interest revenue Information needed to prepare table Gross investment 20-24 = = = (Annual lease payment received x Number of payments) + Unguaranteed residual value ($100,000 x 5) + $20,000 $520,000Initial present value of the investment PV of lease payments (see part 1) PV of unguaranteed residual value $20,000 x PV of a single sum for 5 years at 14% $20,000 x 0. 519369 Total initial PV (this is also the net investment) Unearned interest leases $391,371. 20 10,387. 38 $401,758. 58 = Gross investment Initial PV of the investment = $520,000. 00 $401,758. 58 = $118,241. 42 Sales price = = Present value of lease payments $391,371. 20 (see part 1) = damage of asset PV of the unguaranteed residual value = $313,000. 00 $10,387. 38 = $302,612. 62 Cost of asset leased 21-24 E21-8 (continued) 2. continued) Gross profit = = = Sales price Cost of asset leased $391,371. 20 $302,612. 62 $ 88,758. 58 Summary of Lease Payments Received and Interest Revenue gain by the Edom Company (1) (2) Annual Lease Payments Received $100,000. 00 100,000. 00 100,000. 00 100,000. 00 100,000. 00 (3) Interest Revenue at 14% on Net Investment (4) Lease Receivable $520,000. 00a 420,000. 00 320,000. 00 220,000. 00 120,000. 00 20,000. 00 (5) Unearned Interest Leases $118,241. 42b 75,995. 22 41,834. 55 16,891. 39 2,456. 18 0 (6) Net Investment $401,758. 58 301,758. 58 344,004. 78d 244,004. 78 278,165. 45 178,165. 45 203,108. 61 103,108. 61 117,543. 2 17,543. 82 20,000. 00f Date Jan. 1, 2010 Jan. 1, 2010 Dec. 31, 2010 Jan. 1, 2011 Dec. 31, 2011 Jan. 1, 2012 Dec. 31, 2012 Jan. 1, 2013 Dec. 31, 2013 Jan. 1, 2014 Dec. 31, 2014 a($100,000 b$520,000 $42,246. 20c 34,160. 67 24,943. 16 14,435. 21 2,456. 18e x 5) + $20,000 x 14% + $42,246. 20, or $420,000 $75,995. 22 residual value Lease Receivable Cost of Asset Leased Sales Equipment (or Inventory) Unearned Interest Leases 520,000. 00 302,612. 62 $401,758. 58 c$301,758. 58 d$301,758. 58 eAdjusted for $0. 05 rounding error fUnguaranteed 3. 2010 Jan. 1 391,371. 20 313,000. 00 118,241. 42 21-25 E21-8 (continued) 3. (continued) Jan. Dec. 011 Jan. Dec. E21-9 Summary Table for First 3 Months (1) Bullard Company Month Anson Company Month head start of 1 Beginning of 1 fire of 1 Beginning of 2 cobblers last of 2 Beginning of 3 closing of 3 (2) Lease Payment Required (3) Interest Expense (4) Balance of Lease Obligation 1 31 Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases 100,000 42,246. 20 100,000 42,246. 20 1 31 100,000 34,160. 67 100,000 34,160. 67 Lease Receipt $2,000 0 2,000 0 2,000 0 Interest Revenue 0 $588b 0 574 0 560 Net Investmenta $60,817 58,817 59,405c 57,405 57,979 55,979 56,539 1-26 E21-9 (continued) Receivable $70,0001 68,000 66,000 64,000 1($2,000 2$58,817 b1% aLease Unearned = Interest Leases $9,183 8,595 8,021 7,461 Net Investment $60,8172 59,405 57,979 56,539 x 35) + $2,000 + $588 Lease Receivable Sales ($58,817 + $2,000) Unearned Interest Leases ($72,000 $60,817) Cost of Asset Leased Merchandise Inventory 72,000 60,817 11,183 50,000 2,000 588 2,000 574 2,000 560 50,000 2,000 588 2,000 574 2,000 560 x $58,817 c$58,817 1. At inception Initial receipt At end of inaugural month Cash Lease Receivable Unearned Interest Leases Interest Revenue LeasesSecond Cash Installment Lease Receivable At end of Unearned Interest Leases 2nd month Interest Revenue Leases thirdly Cash induction Lease Receiva ble At end of third month Unearned Interest Leases Interest Revenue Leases 21-27 E21-9 (continued) 2. Computation of Lessees Obligation utilize the Implicit Interest Rate PV of lease payments = $ 2,000 + PV of rest 35 payments of $2,000 each at 1% = $ 2,000 + $58,817 = $60,817* *Note By definition, the present value of the lease payments equals the initial payment plus the present value of the remaining lease payments, since the initial payment is at the beginning of the period.At inception Initial payment At end of 1st month Leased Equipment Capital Leases Obligation Capital Lease Obligation Cash Interest Expense Accrued Interest on Capital Lease Obligation Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment ($60,817 ? 36) Second Accrued Interest on installment Capital Lease Obligation Capital Lease Obligation Cash At end of Interest Expense 2nd month Accrued Interest on Capital Lease Obligation Depreciation Expense Leased Equipment Accumulated Depreci ation Leased Equipment 60,817 2,000 588 588 1,689 1,689 588 1,412 574 574 1,689 1,689 60,817 2,000 ,000 21-28 E21-9 (continued) 2. (continued) Third Accrued Interest on installment Capital Lease Obligation Capital Lease Obligation Cash At end of 3rd month Interest Expense Accrued Interest on Capital Lease Obligation Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment E21-10 Computation of the subject on income before income taxes using the sales-type lease method Sales = PV of lease payments receivable = (PV factor for 8 payments in advance at 12%) x $60,000 = 5. 563757 x $60,000 = $333,825 Cost of asset leased = = Cost of the property $275,000 574 1,426 560 560 1,689 1,689 ,000 21-29 E21-10 (continued) Interest revenue leases = 12% x (Lease receivable Initial payment) Unearned interest leases = 12% x ($60,000 x 8) $60,000) (Lease rec. Sales) = 12% x ($420,000 $146,175) = $32,859 additive progeny on income before income taxes Sales Less Cost of as set leased Gross security deposit Add Interest revenue Incremental revenue recognized $333,825 (275,000) $ 58,825 32,859 $ 91,684 Computation of the effect on income before income taxes using the operating lease method Rental revenue Depreciation expense = $60,000. 0 = = Cost Residual Value Economic life $275,000 $0 8 = $34,375 Incremental effect on income before income taxes Rental revenue $60,000 Less Depreciation expense (34,375) $25,625 military issue on income before income taxes Sales-type lease income Operating lease income Income before income taxes $91,684 (25,625) $66,059 understated 21-30 E21-11 1. Computation of Income Before Income Taxes Derived by Reuben Company for grade Ended December 31, 2010 Rental revenue Maintenance expense Depreciation expense Income before income taxes *10/12 x $180,000 $900,000 150,000* (20,000) (90,000) $ 40,000 ? 10 (It should be depreciated for a full year) 2. Rent expense = 10/12 x $180,000 = $150,000 E21-12 1. use of Criteria for De termination of Lease Classification from Lessors Viewpoint Column A Criteria 1. Transfer of ownership at end of lease 2. Bargain purchase option 3. Met Yes No Yes 80% ( Remarks Lease term is 75% or more of economic life 4 year lease life ) 5 year economic life 4. Present value of lease payments is 90% or more of fair value Column B Criteria 1. Collectibility assured 2.No uncertainties Yes Present value is $8,400, or 100% of the fair value Yes Yes Since the lease meets at least one of the Column A criteria and both of the Column B criteria, and there is no dealers profit (PV of lease payments Cost of car = $8,400 $8,400 = $0), the transaction should be classified as a direct financing lease. 21-31 E21-12 (continued) 2. Summary of lease payments received and interest revenue Computation of amount of lease receipts classly lease receipt = Cost of the car PV factor for 4 payments at 10% $8,400 3. 169865 = $2,649. 96 (Table follows Requirement 3) 3. 2010 Jan. 1 1 car Held for Lease C ash Lease Receivable Automobile Held for Lease Unearned Interest Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases (from table) Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases (from table) 8,400. 00 10,599. 84 8,400. 00 8,400. 00 2,199. 84 2,649. 96 Dec. 31 31 2,649. 96 840. 00 840. 00 2,649. 96 659. 00 659. 00 2011 Dec. 31 31 2,649. 96 21-32 E21-12 (continued) 2.Summary of Lease Payments Received and Interest Revenue Earned by the Ravis Rent-A-Car Company (by Interest Method) (1) (2) Annual Lease Payments Received $2,649. 96 2,649. 96 2,649. 96 2,649. 96 (3) Interest Revenue at 10% on Net Investment $840. 00a 659. 00 459. 90 240. 94f (4) Amount of Net Investment Recovered $1,809. 96b 1,990. 96 2,190. 05 2,409. 02 (5) Lease Receivable $10,599. 84 7,949. 88c 5,299. 92 2,649. 96 -0(6) Unearned Interest Leases $2,199. 84 1,359. 84d 700. 84 240. 94 -0(7) Net Investment $8,400. 00 6,590. 04e 4,599. 08 2,409. 02Date January 1, 2010 Decemb er 31, 2010 December 31, 2011 December 31, 2012 December 31, 2013 a$8,400. 00 b$2,649. 96 21-33 x 10% $840. 00 $2,649. 96 $840. 00 $1,809. 96 c$10,599. 84 d$2,199. 84 e$8,400. 00 fAdjusted for $0. 04 rounding error 21-33 E21-13 1. Present value of lease payments = $10,000 x PV factor for 6 payments at 10% = $10,000 x 4. 355261 = $43,552 (rounded down for simplicity) = $50,000 fair value of the machine $43,552 = $6,448 = $6,448 x FV of 1 factor for 6 periods at 10% = $6,448 x 1. 771561 = $11,421 (rounded) Present value of residual valueResidual value at the end of the lease term 2. 20-34 Since the first third criteria are not met, the classification of the lease depends on the fourth criterion. A guaranteed residual value is not included in the minimum lease payments. Therefore, Baker Company would classify the lease as a capital lease because the fourth criterion is met as follows Present value of minimum lease payments = = $43,552 + $6,448 $50,000, or 100% of the fair value o f the machine 3. Since the first three criteria are not met, the classification of the lease depends on the fourth criterion.An unguaranteed residual value is included in the minimum lease payments. Therefore, Baker Company would classify the lease as an operating lease because the fourth criterion is not met as follows Present value of minimum lease payments = $43,552, or 87. 1% of the fair value of the machine E21-14 1. 2010 Jan. 1 Cash earthly concern Unearned cabbage on Sales-Leaseback Leased Land Capital Lease Obligation indemnification and Property Tax Expense Cash 31 Capital Lease Obligation Interest Expense Leases (14% x $2,500,000) Cash 21-34 2,500,000 2,000,000 500,000 2,500,000 12,000 1 During the year Dec. ,500,000 12,000 7,007 350,000 357,007 E21-14 (continued) 2. The $500,000 unearned profit is amortized by the straight-line method over the 25 year term of the lease. The yearly entry is 2010 Dec. 31 Unearned wampum on Sales Leaseback Realized Profit on Sales Lea seback 20,000 20,000 21-35 SOLUTIONS TO PROBLEMS P21-1 1. Application of Criteria for Determination of Lease Classification Column A Criteria 1. Transfer of ownership at end of lease 2. Bargain purchase option 3. Met No No No Remarks Lease term is 75% or more of economic life 5 year lease life 50% ( ) 10 year economic lifePV of $268,685. 58* is 88% of fair value 4. Present value of lease payments is 90% or more of fair value *PV No = (Yearly lease payments Executory costs) x PV factor for 5 payments in advance at 12% = ($70,000 $3,450) x 4. 037349 = $66,550 x 4. 037349 = $268,685. 58 This lease is an operating lease for both the Alice Company (lessee) and the overlord Equipment Company (lessor). Reasons None of the Column A criteria are met. 2. Alice Company (lessee) 2010 Jan. 1 Rent Expense Cash 70,000 70,000 21-36 P21-1 (continued) 2. (continued) Superior Equipment Company (lessor) 2011 Jan.During the year Dec. 31 1 Cash Rental Revenue Property Tax Expense Maintenance Expense insurance Expense Cash 70,000 650 1,600 1,200 70,000 3,450 Depreciation Expense Equipment 49,500 Accumulated Depreciation Equipment ($500,000 $5,000) ? 10 Application of Criteria for Determination of Lease Classification 49,500 3. Column A Criteria 1. Transfer of ownership at end of lease 2. Bargain purchase option 3. Met No No No Remarks Lease term is 75% or more of economic life 5 year lease life 50% ( ) 10 year economic life PV of $305,000* (rounded) 100% of fair value . Present value of lease payments is 90% or more of fair value *PV Yes = (Yearly lease payments Executory costs) x PV factor for 5 payments in advance at 12% + PV of guaranteed residual value = = = = ($70,000 $3,450) x 4. 037349 + ($64,000 x 0. 567427) ($66,550 x 4. 037349) + $36,315. 33 $268,685. 57 + $36,315. 33 $305,000 (rounded) This lease is a capital lease for both the Alice Company (lessee) and the Superior Equipment Company (lessor). Reasons The lessee would classify the lease as a capital lease because one of the Column A criteria is met. The lessor would classify the lease as a direct financing lease because (a) one of the Column A criteria is met, (b) both of the Column B criteria are met, and (c) there is no profit at the inception of the lease (fair value = present value of the minimum lease payments). 21-37 P21-1 (continued) 3. (continued) Alice Company (lessee) 2010 Jan. 1 1 Leased Equipment Capital Lease Obligation Executory be Expense Capital Lease Obligation Cash Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment ($305,000 $64,000) ? Interest Expense 12% x ($305,000 $66,550) Accrued Interest on Capital Lease Obligation Executory Costs Expense Accrued Interest on Capital Lease Obligation Capital Lease Obligation Cash Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment Interest Expense 12% x ($305,000 $66,550 $37,936) Accrued Interest on Capital Obligation 305,000 3,450 66,550 305,000 70,000 Dec. 31 48,200 48,2 00 28,614 28,614 3,450 28,614 37,936 31 2011 Jan. 1 70,000 Dec. 31 48,200 48,200 24,061. 68 24,061. 68 31 21-38 P21-1 (continued) 3. continued) 2014 Dec. 31 Capital Lease Obligation Cash 64,000 64,000 Superior Equipment Company (lessor) 2010 Jan. 1 1 Equipment Leased to Others Cash Lease Receivable ($66,550 x 5 + $64,000) Equipment Leased to Others Unearned Interest Leases Cash Lease Receivable Property Tax Expense Maintenance Expense policy Expense Cash Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable Property Tax Expense Maintenance Expense Insurance Expense Cash Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable 305,000 305,000 396,750 05,000 91,750 66,550 1 During The Year Dec. 31 2011 Jan. During The Year Dec. 31 2014 Jan. 66,550 650 1,600 1,200 28,614 3,450 28,614 1 66,550 650 1,600 1,200 24,061. 68 66,550 3,450 24,061. 68 1 64,000 64,000 21-39 P21-2 1. Application of Criteria for Determination of Lease Classification Column A Criteria 1. 2. 3. 4. Transfer of ownership at end of lease Bargain purchase option Lease term is 75% or more of economic life Present value of lease payments is 90% or more of fair value Met No Yes Yes 100% Present value is $185,090. 68 or 100% of fair value Remarks YesThis is a sales-type lease for Ballieu Company, since one or more of the Column A criteria are met, both of the Column B criteria are met, and there is a dealers profit (PV of lease payments Cost of asset = $185,090. 68 $150,000 = $35,090. 68) 2. (1) Two-Year Table of Lease Payment Receipts and Interest Revenue acknowledgement (2) Annual Lease Payments Received $35,000. 00 35,000. 00 (3) Interest Revenue at 14% on Net Investment (4) Lease Receivable $280,000. 00a 245,000. 00 210,000. 00 (5) Unearned Interest Leases $94,909. 32b 73,896. 62 (6) Net Investment $185,090. 8 150,090. 68 171,103. 38d 136,103. 38 155,157. 85 Date Jan. 1, 2010 Jan. 1, 2010 Dec. 31, 2010 Jan. 1, 2011 Dec. 31, 2011 a$35,000 $21,012. 70c 19,054. 47 x8 $185,090. 68 x 14% + $21,012. 70 b$280,000 c$150,090. 68 d$150,090. 68 21-40 P21-2 (continued) 2. (continued) 2010 Jan. 1 Lease Receivable ($35,000 x 8) Sales Unearned Interest Leases ($280,000 $185,090. 68) Cost of Asset Leased Specialty Equipment (Inventory) Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases 280,000. 0 185,090. 68 94,909. 32 1 1 Dec. 2011 Jan. Dec. 3. 31 150,000. 00 35,000 21,012. 70 150,000. 00 35,000 21,012. 70 1 31 35,000 19,054. 47 35,000 19,054. 47 The lessor must disclose a. A general description of the leasing arrangements b. (1) The components of the net investment at the date of each balance sheet presented (a) The future lease payments to be received (b) The unearned interest revenue leases (2) Future lease payments to be received for each of the 5 succeeding fiscal years as of the date of the latest balance sheet presented P21-3 1.Present value = Lease payments x PV factor for 5 payments at 12% (asset and liab) = $83,222. 92 x 3. 604776 = $300,000 (rounded) 21-41 P21-3 (continued) 2. (1) Date January 1, 2010 December 31, 2010 December 31, 2011 December 31, 2012 December 31, 2013 December 31, 2014 a$300,000 Summary Table of Lease Payments and Interest Expense for Timmer Company (2) Lease Payment Required $83,222. 92 83,222. 92 83,222. 92 83,222. 92 83,222. 92 (3) Interest Expense at 12% on Obligation Balancea $36,000. 00a 30,333. 25 23,986. 49 16,878. 12 8,916. 74d (4) Reduction of Lease Obligation $47,222. 2b 52,889. 67 59,236. 43 66,344. 80 74,306. 18 (5) Balance of Lease Obligation $300,000. 00 252,777. 08c 199,887. 41 140,650. 98 74,306. 18 -0- x 12% $36,000. 00 $47,222. 92 b$83,222. 92 c$300,000. 00 3. 2010 Jan. Dec. 1 31 Leased Equipment Capital Lease Obligation Capital Lease Obligation Interest Expense Cash Insurance Expense Property Tax Expense Cash Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment ( $300,000. 00 ? 5) Capital Lease Obligation Interest Expense Cash Insurance Expense Property Tax Expense Cash 21-42 300,000 47,222. 2 36,000. 00 3,760 5,440 300,000 83,222. 92 31 9,200 31 60,000 60,000 52,889. 67 30,333. 25 3,100 5,330 2011 Dec. 31 83,222. 92 31 8,430 P21-3 (continued) 3. (continued) Dec. 31 Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment TIMMER confederation Balance canvas tent (Partial) December 31, 2010 Assets Property, Plant, and Equipment Leased property less accumulated amortisation $240,000. 00 (Note X) a$83,222. 92 60,000 60,000 4. Liabilities Current Capital lease obligation Noncurrent Capital lease obligation (Note X) $ 74,306. 17a,c $178,470. 1b,c x 0. 892857 $74,306. 17 b$252,777. 08 cThese amounts computed by the change in present value get down are $52,889. 67 and $199,887. 41, separately Under U. S. GAAP, the Timmer Company would classify the lease as an operating lease. The lease does not meet either of the first two criteria. The third criterion is not met since the 3-year lease life is 60% of the economic life of 5 years. The fourth criterion is also not met since the present value of the lease payments of $269,507 ($120,000 x 2. 245890) is 89. 8% of the fair value of $300,000.Therefore, the lease would be an operating lease. Under IFRS, the Timmer Company would have to exercise judgment but it is likely that it would classify the lease as a finance lease since two of the indicators would probably be considered to be met. The present value of 89. 8% is probably substantially all of the fair value of the asset. Also, it could be argued that 60% is the major part of the economic life of the asset. 5. 21-43 P21-4 1. Summary Table of Lease Payments Received and Interest Revenue Earned by the Calden Company (1) (2) Lease Payment Received $65,000. 0 65,000. 00 65,000. 00 65,000. 00 65,000. 00 65,000. 00 65,000. 00 65,000. 00 (3) Interest Revenue at 15% on Net Investment $46,203. 16c 43,383. 63 4 0,141. 17 36,412. 35 32,124. 20 27,192. 83 21,521. 76 14,999. 87h (4) Reduction of Net Investment $18,796. 84d 21,616. 37 24,858. 83 28,587. 65 32,875. 80 37,807. 17 43,478. 24 50,000. 13 (5) Lease Receivable $570,000a 505,000e 440,000 375,000 310,000 245,000 180,000 115,000 50,000 (6) Unearned Interest Leases $261,978. 97 215,775. 81f 172,392. 18 132,251. 01 95,838. 66 63,714. 46 36,521. 63 14,999. 7 -0(7) Net Investment $308,021. 03b 289,224. 19g 267,607. 82 242,748. 99 214,161. 34 181,285. 54 143,478. 37 100,000. 13 50,000. 00i Date January 1, 2010 December 31, 2010 December 31, 2011 December 31, 2012 December 31, 2013 December 31, 2014 December 31, 2015 December 31, 2016 December 31, 2017 a$570,000 21-44 is the undiscounted value of the lease payments plus the unguaranteed residual value is the present value of the lease payments plus the present value of the unguaranteed residual x 15% b$308,021. 03 value c$308,021. 03 d$65,000. 00 e$570,000 $46,203. 16 $46,203. 16 $18,796. 8 4 residual value $65,000 f$261,978. 97 g$308,021. 03 hAdjusted for $0. 15 rounding error iUnguaranteed 21-44 P21-4 (continued) 2. Criteria for direct financing lease Application of Criteria for Determination of Lease Classification Column A Criteria 1. Transfer of ownership at end of lease 2. Bargain purchase option 3. Lease term is 75% or more of eonomic life 4. Present value of lease payments is 90% or more of fair value *PV of minimum lease payments Met No No Yes 89% ( 8 year lease life ) 9 year economic life Remarks 0-45 Yes PV is 94. 7% of the fair value of the leased asset* = $65,000 x PV factor for 8 payments at 15% = $65,000 x 4. 487322 = $291,675. 93 Column B Criteria 1. Collectibility assured 2. No uncertainties Met Yes Yes Remarks The lease is properly classified as a direct financing lease because at least one of the Column A criteria is met, both of the Column B criteria are met, and there is no dealers profit. 3. 2010 Jan. 1 1 Equipment Leased to Others Cash Lease Rec eivable ($520,000 + $50,000) Equipment Leased to Others Unearned Interest Leases 308,021. 3 308,021. 03 570,000 308,021. 03 261,978. 97 21-45 P21-4 (continued) 3. (continued) Dec. 31 31 2011 Dec. Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases CALDER COMPANY Balance Sheet (Partial) Assets Current Assets Net investment in direct financing leases (Note X) Noncurrent Assets Net investment in direct financing leases (Note X) a$65,000 65,000 46,203. 16 5,000 46,203. 16 31 31 65,000 43,383. 63 65,000 43,383. 63 2012 Dec. 31 31 65,000 40,141. 17 65,000 40,141. 17 4. December 31, 2011 2010 $ 56,521. 73a,d $ 56,521. 73a,c $211,086. 09b,d $232,702. 46b,c x 0. 869565 $289,224. 19 $56,521. 73 12/31/11 $267,607. 82 $56,521. 73 b12/31/10 cThese amounts computed by the change in present value approach are $21,616. 37 and $267,607. 82 , respectively amounts computed by the change in present value approach are $24,858. 83 and $242,748. 99, respectively dThese 21-46 P21-5 1. a) Landlord Company computation of annual rental amount Annual rental amount = = Cost of equipment PV factor for 6 receipts in advance at 14% $300,000 4. 433081 = $67,673. 02 (b) Tenant Company computation of the present value of the lease rights To find the present value of the lease rights, Tenant Company would multiply the annual rental payment ($67,673. 02) by the PV factor for 6 periods paid in advance at i%. The percentage i would be the lower of 14% or Tenant Companys incremental borrowing rate. This incremental borrowing rate is the additional information needed.Summary Table of Lease Payments Received and Interest Revenue Recognition for the Landlord Company (1) (2) Annual Lease Payments Received $67,673. 02 67,673. 02 67,673. 02 67,673. 02 67,673. 02 67,673. 02 2. Date Jan. 1, 2010 Jan. 1, 2010 Dec. 31, 2010 Jan. 1, 2011 Dec. 31, 2011 Jan. 1, 2012 Dec. 31, 2012 Jan. 1, 2013 Dec. 31, 2013 Jan. 1, 2014 Dec. 31, 2014 Jan. 1, 2015 a$67,673. 02 (3) Interest Revenue at 14% on Net Investment (4) Lease Receivable $406,038. 12a 338,365. 10 270,692. 08 203,019. 06 135,346. 04 67,673. 02 0 (5) Unearned Interest Leases $106,038. 12b 73,512. 4 45,907. 18 23,911. 52 8,310. 69 0 (6) Net Investment $300,000. 00 232,326. 98 264,852. 76d 197,179. 74 224,784. 90 157,111. 88 179,107. 54 111,434. 52 127,035. 35 59,362. 33 67,673. 02 0 $32,525. 78c 27,605. 16 21,995. 66 15,600. 83 8,310. 69e x6 $300,000. 00 x 14% d$232,326. 98 eAdjusted + $32,525. 78 b$406,038. 12 c$232,326. 98 for $0. 04 rounding error This table would also be suitable for Tenant Company if Tenants incremental borrowing rate is ? 14%. 21-47 P21-5 (continued) 3. Journal entries Tenant Company (lessee) 2010 Jan. 1 1 During the year Dec. 1 Leased Equipment Capital Lease Obligation Capital Lease Obligation Cash Insurance Expense Property Tax Expense Cash Depreciation E xpense Leased Equipment Accumulated Depreciation Leased Equipment ($300,000 ? 6) Interest Expense Accrued Interest on Capital Lease Obligation Accrued Interest on Capital Lease Obligation Capital Lease Obligation Cash Insurance Expense Property Tax Expense Cash 31 Depreciation Expense Leased Equipment Accumulated Depreciation Leased Equipment Interest Expense Accrued Interest on Capital Lease Obligation 300,000 67,673. 2 700 800 300,000 67,673. 02 1,500 50,000 50,000 32,525. 78 32,525. 78 31 2011 Jan. 1 32,525. 78 35,147. 24 600 750 67,673. 02 During the year Dec. 1,350 50,000 50,000 27,605. 16 27,605. 16 31 21-48 P21-5 (continued) 3. (continued) Landlord Company (lessor) 2010 Jan. 1 1 Equipment Leased to Others Cash Lease Receivable ($67,673. 02 x 6) Equipment Leased to Others Unearned Interest Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases Cash Lease Receivable Unearned Interest Leases Interest Revenue Leases 300,000. 0 406,038. 12 300,000. 00 300,00 0. 00 106,038. 12 67,673. 02 32,525. 78 1 Dec. 2011 Jan. Dec. 4. 31 67,673. 02 32,525. 78 1 31 67,673. 02 27,605. 16 67,673. 02 27,605. 16 Income statements and balance sheets Tenant Company revealing (Lessee) Comparative Balance Sheets (Partial) December 31 Assets 2011 2010 Liabilities 2011 2010 Leased equipment less accumulated amortization (Notes 1 and 2) $200,000. 00 $250,000. 00 Current Capital lease obligation $ 67,673. 02 Noncurrent Capital lease obligation 157,111. 88 (Notes 1 and 2) $ 67,673. 02 197,179. 74