ACCT- Spoiled Baby Corp (SPC) sells baby buggies

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Description

Scenario:
Spoiled Baby Corp (SPC) sells baby buggies. You are the company accountant and have been faced with several decisions over the year.
Part 1: 10%
The company went to the bank to borrow $500,000. You are required to negotiate the best deal. The Board of Directors has asked for you to justify your position.
Part 2: 40%
Recent changes in the law require SPC to warranty its products for 90 days and you have set up the required accounts. Use the data provided to make the appropriate journal entries.
Part 3: 50%
The company began an equipment replacement project and you were required to determine the Book Value of its fixed assets and make decisions regarding the purchase, trades, and disposition of various assets during the year. Use the data provided to record the transactions AND justify your decisions.

Spoiled Baby Corp sells baby buggies and has decided to expand its operations. It needs to borrow $500,000 for 18 months and has sent you to negotiate with the bank.
The bank is more than willing to lend the money to the company and is offering the company a discounted note at 6%. Mr. Moneybags, the banker, has indicated that this is quite a deal and non-discounted notes are currently being charged 6.2% APR As the company accountant you must provide the necessary information to support your recommendation to the Board of Directors.
Part 1
Spoiled Baby Corp sells baby buggies and has decided to expand its operations. It needs to borrow $500,000 for 18 months and has sent you to negotiate with the bank.
The bank is more than willing to lend the money to the company and is offering the company a discounted note at 6%. Mr. Moneybags, the banker, has indicated that this is quite a deal and non-discounted notes are currently being charged 6.2% APR As the company accountant you must provide the necessary information to support your recommendation to the Board of Directors.
Part 2
Spoiled Baby Corp (SPC) sells baby buggies. Recent changes in the law required SPC to warranty its products for 90 days and you must set up the required accounts. Historical Data Page 1 indicates that 6% of monthly sales result in warranty claims. The June 20×1 monthly sales are $481,000.
The following warranty claims were made against June sales.
July 8
July 16
July 26
Aug 4
Aug 14
Aug 25
Aug 29
Sept 2
Sept 5
Sept 18
Sept 27
Sept 29
Oct 1
Oct 14
Oct 21
Oct 28
Oct 30

210
900
421
1,795
267
186
548
111
1,135
242
147
788
1188
489
1,967
683
897

July 14
July 21
July 28
Aug 8
Aug 17
Aug 27
Aug 30
Sept 3
Sept 14
Sept 24
Sept 28
Sept 30
Oct 8
Oct 17
Oct 27
Oct 29
Oct 31

450
385
772
921
1,022
755
899
219
816
987
1,587
489
1387
577
927
492
1572

Prepare the Journal entries required to create and close the warranty period.

Part 3
Spoiled Baby Corp sells baby buggies and has begun an equipment replacement project. You are
required to determine the Book Value of each of its fixed assets and make decisions regarding the
purchases, trades, and disposition of various assets.
Indicate your recommendation and justify your position for each of the following events.

1. SPC purchased a tube extruder on April 3, 2007 for $27,000. It has a useful life of 10 years and a residual value of $4,000. SPC used double declining balance depreciation for this asset. On February 19, 2012 SPC has an offer to sell this unit for 8,000.

2. SPC purchased a winding machine on July 28, 2012 for $21,000. It has a useful life of 6 years or 12,000 hours. It has a residual value of $3,000. SPC is unsure whether to use straight line depreciation or units of production. It anticipates using the equipment approximately 3000 hours each year.

3. SPC purchased a funneling machine on February 9, 2009 for $72,000. It has a useful life of 5 years and a residual value of $12,000. SPC has used Straight line depreciation for this equipment. SPC has determined that this equipment no longer meets its needs and has decided to exchange this unit for a new model. The new Model has a MSRP of $100,000. On December 28, 2012 SPC will exchange its equipment for the new Model and pay $77,000.

4. SPC has a fully piece of equipment that is currently fully depreciated on its books. This equipment is no longer used and SPC wants to get rid of it. The cost of the equipment is $10,000. The company has been offered $300 for its parts. What is the journal entry that would record this transaction?

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