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Chapter 15 Spiceland 6th edition

# Chapter 15 Spiceland 6th edition - Exercise 15-2 January 1...

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Unformatted text preview: Exercise 15-2 January 1, 2011 Prepaid rent (advance payment)....................... 96,000 Cash .......................................................... 96,000 Prepaid rent (annual rent payment)................... 80,000 Cash .......................................................... 80,000 Leasehold improvements.............................. 180,000 Cash .......................................................... 180,000 December 31, 2011 Rent expense (annual rent).............................. 80,000 Prepaid rent .............................................. 80,000 Rent expense (advance payment allocation)....... 32,000 Prepaid rent (\$96,000 ÷ 3)........................... 32,000 Depreciation expense (\$180,000 ÷ 3 years)....... 60,000 Accumulated depreciation........................ 60,000 Exercise 15-15 Situation 1 2 3 4 A. The lessor’s: 1. Minimum lease payments 1 \$700,000 \$750,000 \$800,000 \$840,000 2. Gross investment in the lease 2 700,000 750,000 850,000 900,000 3. Net investment in the lease 3 548,592 547,137 610,168 596,764 B. The lessee’s: 4. Minimum lease payments 4 700,000 750,000 800,000 840,000 5. Leased asset 5 548,592 547,137 586,842 572,531 6. Lease liability 6 548,592 547,137 586,842 572,531 1 (\$100,000 x number of payments) + residual value guaranteed by lessee and/or by third party; for situation 4: (\$100,000 x 8) + (\$40,000). 2 Minimum lease payments plus unguaranteed residual value; for situation 4: (\$840,000 + \$60,000). 3 Present value of gross investment (discounted at lessor’s rate); for situation 4: (\$100,000 x 5.56376) + (\$100,000 x .40388). 4 (\$100,000 x number of payments) + residual value guaranteed by lessee ; for situation 4: (\$100,000 x 8) + \$40,000. 5 Present value of minimum lease payments (discounted at lower of lessor’s rate and lessee’s incremental borrowing rate); should not exceed fair value; for situation 4: (\$100,000 x 5.56376) + (\$40,000 x .40388). 6 Present value of minimum lease payments (discounted at lower of lessor’s rate and lessee’s incremental borrowing rate); should not exceed fair value; for situation 4: (\$100,000 x 5.56376) + (\$40,000 x .40388). Exercise 15-16 Situation 1 Amount to be recovered (fair value) \$60,000 Less: Present value of the BPO price (\$10,000 x .56743 * ) (5,674 ) Amount to be recovered through periodic lease payments \$54,326 _____________________ ↓ Lease payments at the beginning ↓ of each of the next 5 years: (\$54,326 ÷ 4.03735 ** ) \$13,456 * present value of \$1: n=5, i=12% ** present value of an annuity due of \$1: n=5, i=12% Situation 2 Amount to be recovered (fair value) \$420,000 Less: Present value of the BPO price (\$50,000 x .59345 * ) (29,673 ) Amount to be recovered through periodic lease payments \$390,327 _____________________...
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Chapter 15 Spiceland 6th edition - Exercise 15-2 January 1...

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