Chp 21 12 ed Exercises and Problems Solutions

Chp 21 12 ed Exercises and Problems Solutions - EXERCISE...

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EXERCISE 21-1 (15–20 minutes) (a) This is a capital lease to Burke since the lease term (5 years) is greater than 75% of the economic life (6 years) of the leased asset. The lease term is 83 1 / 3 % (5 ÷ 6) of the asset’s economic life. (b) Computation of present value of minimum lease payments: $8,668 X 4.16986* = $36,144 *Present value of an annuity due of 1 for 5 periods at 10%. (c) 1/1/07 Leased Machine Under Capital Leases. .................................................. 36,144 Lease Liability. ................................. 36,144 Lease Liability. ......................................... 8,668 Cash. .................................................. 8,668 12/31/07 Depreciation Expense. ............................ 7,229 Accumulated Depreciation— Capital Leases. ............................. 7,229 ($36,144 ÷ 5 = $7,229) Interest Expense. ..................................... 2,748 Interest Payable. ............................... 2,748 [($36,144 – $8,668) X .10] 1/1/08 Lease Liability. ......................................... 5,920 Interest Payable. ...................................... 2,748 Cash. .................................................. 8,668
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EXERCISE 21-7 (20–25 minutes) (a) This is a capital lease to Flynn since the lease term is 75% (6 ÷ 8) of the asset’s economic life. In addition, the present value of the minimum lease payments is more than 90% of the fair value of the asset. This is a capital lease to Bensen since collectibility of the lease payments is reasonably predictable, there are no important uncertainties surrounding the costs yet to be incurred by the lessor, and the lease term is 75% of the asset’s economic life. Because the fair value of the equipment ($150,000) exceeds the lessor’s cost ($120,000), the lease is a sales-type lease. (b) Computation of annual rental payment: $150,000 – ($10,000 × .53464)* 4.69590** = $30,804 * *Present value of $1 at 11% for 6 periods. **Present value of an annuity due at 11% for 6 periods. (c) 1/1/07 Leased Equipment Under Capital Leases. ............................................... 141,846 Lease Liability. ............................... 141,846 ($30,804 X 4.60478)*** Lease Liability. ...................................... 30,804 Cash. ............................................... 30,804 ***Present value of an annuity due at 12% for 6 periods. 12/31/07 Depreciation Expense. ......................... 23,641 Accumulated Depreciation. .......... 23,641 ($141,846 ÷ 6 years) Interest Expense. .................................. 13,325
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Interest Payable. ............................ 13,325 ($141,846 – $30,804) X .12
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EXERCISE 21-7 (Continued) (d) 1/1/07 Lease Receivable. ............................ 150,000* Cost of Goods Sold. ......................... 114,654** Sales. ......................................... 144,654***
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This note was uploaded on 11/30/2010 for the course BUSINESS 4230 taught by Professor Dee during the Spring '10 term at Community College of Denver.

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Chp 21 12 ed Exercises and Problems Solutions - EXERCISE...

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