Roman company leased equipment from koenig company on

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93. Roman Company leased equipment from Koenig Company on July 1, 2011, for an eight- year period expiring June 30, 2019. Equal annual payments under the lease are $300,000 and are due on July 1 of each year. The first payment was made on July 1, 2011. The rate of interest contemplated by Roman and Lennon is 8%. The cash selling price of the equipment is $1,861,875 and the cost of the equipment on Koenig's accounting records was $1,650,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Koenig, what is the amount of profit on the sale and the interest income that Lennon would record for the year ended December 31, 2011? a. $0 and $0 b. $0 and $62,475 c. $211,875 and $62,475 d. $211,875 and $74,475 Use the following information for questions 94 through 98. Gage Co. purchases land and constructs a service station and car wash for a total of $360,000. At January 2, 2010, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $400,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was $40,000. The lease is a 10-year, noncancelable lease. Gage uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Gage at termination of the lease. A partial amortization schedule for this lease is as follows: Payments Interest Amortization Balance Jan. 2, 2010 $400,000.00 Dec. 31, 2010 $65,098.13 $40,000.00 $25,098.13 374,901.87 Dec. 31, 2011 65,098.13 37,490.19 27,607.94 347,293.93 Dec. 31, 2012 65,098.13 34,729.39 30,368.74 316,925.19 94. From the viewpoint of the lessor, what type of lease is involved above? 21 - 23
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95. What is the discount rate implicit in the amortization schedule presented above? 96. The total lease-related expenses recognized by the lessee during 2011 is which of the following? (Rounded to the nearest dollar.) 97. What is the amount of the lessee's liability to the lessor after the December 31, 2012 payment? (Rounded to the nearest dollar.) a. $400,000 b. $374,902 c. $347,294 d. $316,925 *98. The total lease-related income recognized by the lessee during 2011 is which of the following? *99. On June 30, 2011, Falk Co. sold equipment to an unaffiliated company for $700,000. The equipment had a book value of $630,000 and a remaining useful life of 10 years. That same day, Falk leased back the equipment at $7,000 per month for 5 years with no option to renew the lease or repurchase the equipment. Falk's rent expense for this equipment for the year ended December 31, 2011, should be a. $84,000. b. $42,000. c. $35,000. d. $28,000. Multiple Choice Answers —Computational Item Ans Item
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