m131bch21practiceproblemswithsolutions

Intermediate Accounting

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M131B: INTERMEDIATE ACCOUNTING CHAPTER 21: LEASES PRACTICE PROBLEMS NAME: ________________________________ STUDENT ID: ___________________________ 1. On December 1, 2008, Perez Corporation leased office space for 10 years at a monthly rental of $90,000. On that date Perez paid the landlord the following amounts: Rent deposit $ 90,000 First month's rent 90,000 Last month's rent 90,000 Installation of new walls and offices 495,000 $765,000 The entire amount of $765,000 was charged to rent expense in 2008. What amount should Perez have charged to expense for the year ended December 31, 2008? a. $90,000 b. $94,125 c. $184,125 d. $495,000 2. On January 1, 2008, Penn Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Penn to make annual payments of $100,000 at the end of each year for ten years with title to pass to Penn at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Penn uses the straight-line method of depreciation for all of its fixed assets. Penn accordingly accounted for this lease transaction as a capital lease. The lease payments were determined to have a present value of $671,008 at an effective interest rate of 8%. With respect to this capitalized lease, Penn should record for 2008 a. lease expense of $100,000. b.
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m131bch21practiceproblemswithsolutions - M131B:...

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