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

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