Week Seven Homework Acct305
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Week Seven Homework Acct305 as PDF for free.
More details
- Words: 548
- Pages: 7
SOLUTIONS – WEEK SEVEN – ACCT 305
Exercise 151 (a) NathLangstrom Services, Inc. (Lessee) June 30, 2006 Rent expense................................... Cash ...........................................
10,000 . . .10,000
December 31, 2006 Rent expense................................... Cash ...........................................
10,000 . . .10,000
(b) ComputerWorld Corporation (Lessor) June 30, 2006 Cash................................................ Rent revenue................................
10,000 . . .10,000
December 31, 2006 Cash................................................ Rent revenue................................
10,000 . . .10,000
Depreciation expense ($90,000 ÷ 6 years) Accumulated depreciation..........
15,000 . . .15,000
Exercise 154 Present Value of Minimum Lease Payments: ($15,000 x 7.47199*)
=
$112,080
rental present payments value * present value of an annuity due of $1: n=8, i=2% [i = 2% (8% ÷ 4) because the lease calls for quarterly payments]
Lease Amortization Schedule Rental
Effective Decrease
Outstanding Payments
Interest
in Balance
Balance 2% x Outstanding Balance
1 2 3 4 5 6 7
112,080 15,000 97,080 15,000 84,022 15,000 70,702 15,000 57,116 15,000 43,258 15,000 29,123 15,000 14,705
15,000 .02
(97,080)
= 1,942
13,058
.02
(84,022)
= 1,680
13,320
.02
(70,702)
= 1,414
13,586
.02
(57,116)
= 1,142
13,858
.02
(43,258)
=
865
14,135
.02
(29,123)
=
582
14,418
8
15,000 0
.02
(14,705)
= 295 *
120,000 112,080
14,705 7,920
* adjusted for rounding of other numbers in the schedule
January 1, 2006 Leased equipment (calculated above).......................112,080 ........................Lease payable (calculated above)........... 112,080 Lease payable ............................................................15,000 .........................................Cash (rental payment)...........
15,000
Exercise 154 (concluded) April 1, 2006 Interest expense (2% x [$112,080 – 15,000])...............1,942 Lease payable (difference).........................................13,058 .........................................Cash (rental payment)...........
15,000
July 1, 2006 Interest expense (2% x $84,022: from schedule) .........1,680 Lease payable (difference).........................................13,320 .........................................Cash (rental payment)...........
15,000
October 1, 2006 Interest expense (2% x $70,702: from schedule) .........1,414 Lease payable (difference).........................................13,586 .........................................Cash (rental payment)...........
15,000
December 31, 2006 Interest expense (2% x $57,116: from schedule). .........1,142 ...................................................Interest payable ...........
1,142
Depreciation expense ($112,080 ÷ 2 years)...............56,040 ...................................Accumulated depreciation...........
56,040
January 1, 2007 Interest payable (from adjusting entry)........................1,142 Lease payable (difference).........................................13,858 .........................................Cash (rental payment)...........
15,000
Exercise 1517 Requirement 1 Amount to be recovered (fair market value)
$30,900
Less: Present value of the BPO price ($12,000 x .75131*)
(9 ,016)
Amount to be recovered through periodic rental payments $21 ,884 _____________________↓ ↓
Rental payments at the beginning each of three years: $8,000
($21,884 ÷ 2.73554**)
* present value of $1: n=3, i=10% ** present value of an annuity due of $1: n=3, i=10%
Requirement 2
Lease Amortization Schedule Dec. Payments 31
Effective Interest 10% x Outstanding Balance
Decrease in Balance
Outstanding Balance
30,900 2005 8,000 2006 8,000 2007 8,000 200812,000 36,000
.10 (22,900) = .10 (17,190) = .10 (10,909) =
2,290 1,719 1 ,091 5,100
8,000 5,710 6,281 10,909 30,900
22,900 17,190 10,909 0
Exercise 1517 (concluded) Requirement 3 December 31, 2005 Lease receivable ([$8,000 x 3] + $12,000)..................... 36,000 ......................................Unearned interest revenue ($36,000 30,900) ............................Inventory of equipment (lessor’s cost) Cash (lease payment)...................................................... ..............................................................Lease receivable December 31, 2006 Cash (lease payment)...................................................... ..............................................................Lease receivable
8,000
8,000
5,100 30,900
8,000
8,000
Unearned interest revenue .............................................. 2,290 .........................................................Interest revenue (10% x [$30,900 8,000]) ...............................................................................2,290 December 31, 2007 Cash (lease payment)...................................................... ..............................................................Lease receivable
8,000
8,000
Unearned interest revenue .............................................. 1,719 .........................................................Interest revenue (10% x $17,190 : from schedule) ........................................................................................ 1,719 December 30, 2008 Unearned interest revenue (account balance)................. 1,091 .........................................................Interest revenue (10% x $10,909 : from schedule) ........................................................................................ 1,091 Cash (BPO price)............................................................ ................................Lease receivable (account balance)
12,000
12,000
Exercise 151 (a) NathLangstrom Services, Inc. (Lessee) June 30, 2006 Rent expense................................... Cash ...........................................
10,000 . . .10,000
December 31, 2006 Rent expense................................... Cash ...........................................
10,000 . . .10,000
(b) ComputerWorld Corporation (Lessor) June 30, 2006 Cash................................................ Rent revenue................................
10,000 . . .10,000
December 31, 2006 Cash................................................ Rent revenue................................
10,000 . . .10,000
Depreciation expense ($90,000 ÷ 6 years) Accumulated depreciation..........
15,000 . . .15,000
Exercise 154 Present Value of Minimum Lease Payments: ($15,000 x 7.47199*)
=
$112,080
rental present payments value * present value of an annuity due of $1: n=8, i=2% [i = 2% (8% ÷ 4) because the lease calls for quarterly payments]
Lease Amortization Schedule Rental
Effective Decrease
Outstanding Payments
Interest
in Balance
Balance 2% x Outstanding Balance
1 2 3 4 5 6 7
112,080 15,000 97,080 15,000 84,022 15,000 70,702 15,000 57,116 15,000 43,258 15,000 29,123 15,000 14,705
15,000 .02
(97,080)
= 1,942
13,058
.02
(84,022)
= 1,680
13,320
.02
(70,702)
= 1,414
13,586
.02
(57,116)
= 1,142
13,858
.02
(43,258)
=
865
14,135
.02
(29,123)
=
582
14,418
8
15,000 0
.02
(14,705)
= 295 *
120,000 112,080
14,705 7,920
* adjusted for rounding of other numbers in the schedule
January 1, 2006 Leased equipment (calculated above).......................112,080 ........................Lease payable (calculated above)........... 112,080 Lease payable ............................................................15,000 .........................................Cash (rental payment)...........
15,000
Exercise 154 (concluded) April 1, 2006 Interest expense (2% x [$112,080 – 15,000])...............1,942 Lease payable (difference).........................................13,058 .........................................Cash (rental payment)...........
15,000
July 1, 2006 Interest expense (2% x $84,022: from schedule) .........1,680 Lease payable (difference).........................................13,320 .........................................Cash (rental payment)...........
15,000
October 1, 2006 Interest expense (2% x $70,702: from schedule) .........1,414 Lease payable (difference).........................................13,586 .........................................Cash (rental payment)...........
15,000
December 31, 2006 Interest expense (2% x $57,116: from schedule). .........1,142 ...................................................Interest payable ...........
1,142
Depreciation expense ($112,080 ÷ 2 years)...............56,040 ...................................Accumulated depreciation...........
56,040
January 1, 2007 Interest payable (from adjusting entry)........................1,142 Lease payable (difference).........................................13,858 .........................................Cash (rental payment)...........
15,000
Exercise 1517 Requirement 1 Amount to be recovered (fair market value)
$30,900
Less: Present value of the BPO price ($12,000 x .75131*)
(9 ,016)
Amount to be recovered through periodic rental payments $21 ,884 _____________________↓ ↓
Rental payments at the beginning each of three years: $8,000
($21,884 ÷ 2.73554**)
* present value of $1: n=3, i=10% ** present value of an annuity due of $1: n=3, i=10%
Requirement 2
Lease Amortization Schedule Dec. Payments 31
Effective Interest 10% x Outstanding Balance
Decrease in Balance
Outstanding Balance
30,900 2005 8,000 2006 8,000 2007 8,000 200812,000 36,000
.10 (22,900) = .10 (17,190) = .10 (10,909) =
2,290 1,719 1 ,091 5,100
8,000 5,710 6,281 10,909 30,900
22,900 17,190 10,909 0
Exercise 1517 (concluded) Requirement 3 December 31, 2005 Lease receivable ([$8,000 x 3] + $12,000)..................... 36,000 ......................................Unearned interest revenue ($36,000 30,900) ............................Inventory of equipment (lessor’s cost) Cash (lease payment)...................................................... ..............................................................Lease receivable December 31, 2006 Cash (lease payment)...................................................... ..............................................................Lease receivable
8,000
8,000
5,100 30,900
8,000
8,000
Unearned interest revenue .............................................. 2,290 .........................................................Interest revenue (10% x [$30,900 8,000]) ...............................................................................2,290 December 31, 2007 Cash (lease payment)...................................................... ..............................................................Lease receivable
8,000
8,000
Unearned interest revenue .............................................. 1,719 .........................................................Interest revenue (10% x $17,190 : from schedule) ........................................................................................ 1,719 December 30, 2008 Unearned interest revenue (account balance)................. 1,091 .........................................................Interest revenue (10% x $10,909 : from schedule) ........................................................................................ 1,091 Cash (BPO price)............................................................ ................................Lease receivable (account balance)
12,000
12,000
Related Documents
Week Seven Homework Acct305
October 2019 19
Week Two Homework Acct305
October 2019 30
Week Five Homework Acct305
October 2019 24
Week One Homework Acct305
October 2019 32
Week Six Homework Acct305
October 2019 14