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Chap015 solutions

# Chap015 solutions - Chapter 15 Leases Chapter 15 Leases...

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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

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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 0 120,000 7,920 112,080 * adjusted for rounding of other numbers in the schedule January 1, 2011 15- 3

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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) ..................................... 13,058 .............................................. Cash (lease payment) .................................................................. 15,000 July 1, 2011 Interest expense (2% x \$84,022: from schedule) ........ 1,680 Lease payable (difference) ..................................... 13,320 .............................................. Cash (lease payment) .................................................................. 15,000 October 1, 2011 Interest expense (2% x \$70,702: from schedule) ........ 1,414 Lease payable (difference) ..................................... 13,586 .............................................. Cash (lease payment) .................................................................. 15,000 December 31, 2011 Interest expense (2% x \$57,116: from schedule) ......... 1,142 .................................................. Interest payable .................................................................... 1,142 Depreciation expense (\$112,080 ÷ 2 years) ............... 56,040 ................................... Accumulated depreciation .................................................................. 56,040 January 1, 2012 Interest payable (from adjusting entry) ....................... 1,142 Lease payable (difference) ..................................... 13,858 .............................................. Cash (lease payment) .................................................................. 15,000 15- 5

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Chapter 15 - Leases Exercise 15-4 15- 6
Chapter 15 - Leases 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 0 120,000 7,920 112,080 * adjusted for rounding of other numbers in the schedule January 1, 2011 Lease receivable (fair value) .................................. 112,080 ................... Inventory of equipment (lessor’s cost) ................................................................ 112,080 Cash (lease payment) .............................................. 15,000 ................................................. Lease receivable .................................................................. 15,000 April 1, 2011 Cash (lease payment) .............................................. 15,000 ................................ Lease receivable (difference) .................................................................. 13,058 ............................................... Interest revenue (2% x [\$112,080 – 15,000]) .................................................................... 1,942 July 1, 2011 Cash (lease payment) .............................................. 15,000 ................................. Lease receivable (difference) .................................................................. 13,320 15- 7

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Chapter 15 - Leases ............................................... Interest revenue (2% x \$84,022: from schedule) ............................................................................. 1,680 15- 8
Chapter 15 - Leases Exercise 15-4 (concluded) October 1, 2011 Cash (lease payment) .............................................. 15,000 ................................. Lease receivable (difference) .................................................................. 13,586 ............................................... Interest revenue (2% x \$70,702: from schedule) ............................................................................. 1,414 December 31, 2011 Interest receivable .............................................. 1,142 ............................................... Interest revenue (2% x \$57,116: from schedule) ............................................................................. 1,142 January 1, 2012 Cash (lease payment) .............................................. 15,000 ................................. Lease receivable (difference) .................................................................. 13,858 ................ Interest receivable (from adjusting entry) .................................................................... 1,142 15- 9

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Chapter 15 - Leases Exercise 15-5 Requirement 1 Lessor’s Calculation of Lease Payments
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Chap015 solutions - Chapter 15 Leases Chapter 15 Leases...

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