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E21-14 - Debit Rental expense as on(for a periodof 10months...

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On Feb 20 2011 Hooke Inc purchased a machine for $1200000 for the purpose of leasing it. The machine is epected to have a 10 year life ,noresidual value and will be depreciated on the straightline basis. The machine was leased toSage company on March 01 2011 for a 4 year period at monthly rental of $15600. There is no provision for the renewal of the lease or purchase of the machine by the lessee at the expiration of the lease term. Hooke paid n$ 30000 of commissions associated with negotiating the lease in Feb 2011 A. What expense should sage record as a result of the facts above for the year ended DEC 31 2011,show supporting computations in good form.
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Unformatted text preview: Debit Rental expense as on Dec 31, 2011(for a periodof 10months from march to dec) =15600*10 =156000 Credit Cash =156000 Rental Expense 156000 Cash 156000 B. What income or loss before income taxes should hooke record as a result for the facts above for the year ended DeC 31 2011 Cash 156000 Rental Income 156000 Depriciation per year would be 1200000/10 =120000 Per month it would be 120000/12= 10000 For 10 months from march to dec depreciation would be 10000*10=100000 Depreciation Expense 100000 Accumulated Depreciation 100000 Lease initiation fee 30000 Cash 30000 Total income would be 156000-100000-30000= 26000...
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