Lease+Class+2+completed+exercises+in+class+3

Lease+Class+2+completed+exercises+in+class+3 - E209 (a)...

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1 E 20-9 E 20-9 (a) Entries for Morrison Corp. are as follows: 1/7/11 Building (Leased) . ......................... 5,500,000 Cash . ..................................... 5,500,000 Property Tax Expense . ................. 57,000 Insurance Expense . ...................... 11,000 Cash . ..................................... 68,000 12/31/11 Rent Receivable . ........................... 162,500 Rental Income . ..................... 162,500 ($325,000 X 6 / 12 = $162,500) Depreciation Expense . .................. 68,750 Accumulated Depreciation —Building . ........................ 68,750 [($5,500,000 ÷ 40) X 6 / 12 = $68,750]
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2 E 20-9 E 20-9 (b) Entries for Wisen Inc. are as follows: 12/31/11 Rent Expense . ............................... 162,500 Rent Payable . ....................... 162,500 (c) The real estate broker’s fee should be amortized equally over the 10-year period. As a result, real estate fee expense of $1,500 ($30,000 ÷ 10 X 6 ÷ 12) should be reported as an expense in 2011 and $3,000 per year for each of the next nine years until the last year of the lease when the expense will be $1,500. (d) None of the accounting treatment above would change if Morrison were to use private enterprise GAAP.
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3 E 20-16 E 20-16 (a) (1) Calculation of gross investment: $24,736 X 6 = $148,416 (2) Calculation of unearned interest income: Gross investment $148,416 Less: Fair market value of machine 123,500* Unearned interest income $ 24,916 *$24,736 X 4.99271 (PV factor of annuity due at 8% for 6 periods) Excel formula =PV(rate,nper,pmt,fv,type) Using a financial calculator: PV $ ? Yields $123,499.68 I 8% N 6 PMT $ 24,736 FV $ 0 Type 1 (3) Net investment in lease: Lease payments receivable $148,416 Less: Unearned interest income – leases 24,916 $123,500
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4 E 20-16 E 20-16 (b) 1/1/11 Lease Payments Receivable . ............. 148,416 Cost of Goods Sold . ............................ 99,000
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This note was uploaded on 12/16/2011 for the course ACTG 3P33 taught by Professor N-a during the Fall '08 term at Brock University, Canada.

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Lease+Class+2+completed+exercises+in+class+3 - E209 (a)...

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