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# ch15 - CPA Exam Questions Chapter 15 1 b The 4 year lease...

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CPA Exam Questions Chapter 15 1. b. The 4 year lease term is greater than 75% of the asset's 5 year life making this a capital lease . 2. b. \$111,500 Present value at 1/1/09 \$112,500 Payment made 12/30/09 \$10,000 Interest portion for 2009 (8% × \$112,500) (9,000 ) Portion applied to the liability (1,000 ) Capital lease liability 12/31/09 \$111,500 3. a. The key point is to first calculate the annual payments required by the lease. Use the basic present value formula: Annual Payments × Present Value Factor = Present Value of Future Payments. Therefore: Annual Payments × 4.313 = \$323,400; Annual payments = \$323,400/4.313; Annual payments = \$75,000. Then multiply the customer's \$75,000 annual payment by 5 years for a total of \$375,000. This figure represents Glade Co.'s gross Lease Receivable. The difference between the gross Lease Receivable and the present value of the future payments is the total amount of Interest Revenue that will be earned over the life of the lease (\$375,000 - \$323,400 = \$51,600). 4. c. The profit on the sale is the difference between the cash selling price and the book value, \$3,520,000 - \$2,800,000 = \$720,000. The interest is computed as follows:

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