Chap015 solutions - Chapter 15 - Leases Exercise 15-1 (a)...

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Unformatted text preview: Chapter 15 - Leases Exercise 15-1 (a) Nath-Langstrom Services, Inc. (Lessee) June 30, 2011 Rent expense................................... 10,000 Cash ............................................ 10,000 December 31, 2011 Rent expense................................... 10,000 Cash ............................................ 10,000 (b) ComputerWorld Corporation (Lessor) June 30, 2011 Cash................................................ 10,000 Rent revenue............................... 10,000 December 31, 2011 Cash................................................ 10,000 Rent revenue............................... 10,000 Depreciation expense ($90,000 6 years) 15,000 Accumulated depreciation.......... 15,000 15- 1 Chapter 15 Leases Chapter 15 - Leases 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 15- 2 Chapter 15 - Leases Exercise 15-3 Present Value of Minimum Lease Payments: ($15,000 x 7.47199 * ) = $112,080 lease present payments value * present value of an annuity due of $1: n=8, i=2% [i = 2% (8% 4) because the lease calls for quarterly payments] Lease Amortization Schedule Lease Effective Decrease Outstanding Payments Interest in Balance Balance 2% x Outstanding Balance 112,080 1 15,000 15,000 97,080 2 15,000 .02 (97,080) = 1,942 13,058 84,022 3 15,000 .02 (84,022) = 1,680 13,320 70,702 4 15,000 .02 (70,702) = 1,414 13,586 57,116 5 15,000 .02 (57,116) = 1,142 13,858 43,258 6 15,000 .02 (43,258) = 865 14,135 29,123 7 15,000 .02 (29,123) = 582 14,418 14,705 8 15,000 .02 (14,705) = 295 * 14,705 120,000 7,920 112,080 * adjusted for rounding of other numbers in the schedule January 1, 2011 15- 3 Chapter 15 - Leases Leased equipment (calculated above)..................... 112,080 ............................Lease payable (calculated above) ................................................................112,080 Lease payable ..................................................... 15,000 .............................................. Cash (lease payment) ..................................................................15,000 15- 4 Chapter 15 - Leases Exercise 15-3 (concluded) April 1, 2011 Interest expense (2% x [$112,080 15,000]).............. 1,942 Lease payable (difference).....................................Lease payable (difference)....
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This note was uploaded on 03/12/2012 for the course ACCT 211 taught by Professor Kamlet during the Spring '08 term at Binghamton University.

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Chap015 solutions - Chapter 15 - Leases Exercise 15-1 (a)...

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