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Class8-solution

# Class8-solution - EXERCISE 21-6(a \$35,013(4.7122 x 35,013 =...

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EXERCISE 21-6 (a) \$35,013 + (4.7122* x 35,013) = \$200,001 *Present value of an annuity of 1 for 7 periods at 11%. (b) 1/1/07 Lease Receivable ......................... 200,001 Cost of Goods Sold ..................... 160,000 Sales ....................................... 200,001 Inventory ................................ 160,000 1/1/07 Cash .............................................. 35,013 Lease Receivable .................. 35,013 12/31/07 Interest Receivable ...................... 18,149 Interest Revenue ................... 18,149 [(\$200,001 – \$35,013) x .11] 1

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EXERCISE 21-12 (a) Entries for Doug Nelson are as follows: 1/1/07 Building .................................... 4,500,000 Cash ...................................... 4,500,000 12/31/07 Cash .......................................... 275,000 Rental Revenue ................. 275,000 Depreciation Expense ............. 90,000 Accumulated Depreciation— Building ......................... 90,000 (\$4,500,000 ÷ 50) Property Tax Expense ............. 85,000 Insurance Expense .................. 10,000 Cash ................................... 95,000 (b) Entries for Patrick Wise are as follows: 12/31/07 Rent Expense ........................... 275,000 Cash ................................... 275,000 (c) The real estate broker’s fee should be capitalized and amortized equally over the 10-year period. As a result, real estate fee expense of \$3,000 (\$30,000 ÷ 10) should be reported in each period. 2
PROBLEM 21-2 (a) The lease is an operating lease to the lessee and lessor because: 1. it does not transfer ownership, 2. it does not contain a bargain purchase option, 3. it does not cover at least 75% of the estimated economic life of the crane, and 4.

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