20-Solutions to Suggested Problems

20-Solutions to Suggested Problems - PROBLEM 20-12 (a)...

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PROBLEM 20-12 (a) January 31, 2011 Leased Equipment . .................................... 173,448 Lease Obligation . ................................ 173,448 (To record leased asset and related obligation) PV of monthly payment of $41,000 X 4.16987* . ............. $170,964 PV of residual value of $4,000 X .62092** . ...................... 2,484 Present value of minimum lease payments . .................. $173,448 * (PV factor for annuity due for 5 years at 10%) ** (PV factor for $1 for 5 years at 10%) Excel formula =PV(rate,nper,pmt,fv,type) Using a financial calculator: PV $ ? Yields $ 173,448.17 I 10% N 5 PMT $ (41,000) FV $ (4,000) Type 1 January 31, 2011 Lease Obligation . ....................................... 41,000 Cash . .................................................... 41,000 (To record the first rental payment) (b) December 31, 2011 Depreciation Expense . ............................... 22,713 Accumulated Depreciation—Leased Equipment . ...................................... 22,713 (To record depreciation of the leased asset based upon a cost to Dubois of $173,448 and a life of 7 years X 11/ 12)
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PROBLEM 20-12 (Continued) December 31, 2011 Interest Expense . ............................................... 12,141 Interest Payable . ......................................... 12,141 (To record accrual of interest on lease obligation $13,245 X 11 / 12) January 31, 2012 Interest Payable . ................................................ 12,141 Interest Expense . ............................................... 1,104 Lease Obligation . ............................................... 27,755 Cash . ........................................................... 41,000 (To record annual payment on lease obligation) During year Property Tax Expense . ..................................... XXX Insurance Expense . .......................................... XXX Maintenance Expense . ..................................... XXX Cash . .......................................................... XXX (To record payment for executory costs) Dubois Steel Corporation (Lessee) Lease Amortization Schedule (Annuity Due Basis) Date Annual Lease Payment Interest (10%) on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation 1/31/11 1/31/11 1/31/12 1/31/13 1/31/14
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This note was uploaded on 10/26/2011 for the course ACCT 3410 taught by Professor Jobs during the Spring '11 term at Kwantlen Polytechnic University.

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20-Solutions to Suggested Problems - PROBLEM 20-12 (a)...

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