# It back for one year pertinent information at this

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it back for one year. Pertinent information at this date follows: Sales price \$900,000 Carrying amount 825,000 Present value of reasonable lease rentals (\$7,500 for 12 months @ 12%) 85,000 Estimated remaining useful life 12 years In Haden’s December 31, 2011 balance sheet, the deferred profit from the sale of this machine should be a. \$85,000. b. \$75,000. c. \$10,000. d. \$0. Multiple Choice Answers —CPA Adapted Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. 100. c 102. d 104. d 106. c *108 . d 101. a 103. a 105. d 107. a *109 d 21 - 27

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Test Bank for Intermediate Accounting, Thirteenth Edition DERIVATIONS — Computational No. Answer Derivation 52. b \$90,000 + \$495,000 1 10 12 4 = \$94,125. 53. c \$671,008 × .08 = \$53,681, \$671,008 ÷ 15 = \$44,734. 54. c \$3,000,000 ÷ 6.14457 = \$488,236 (PV of Ordinary Annuity Table). 55. d \$488,236 + \$10,000 = \$498,237. 56. c Conceptual. 57. a Conceptual, FV exceeds cost. 58. c \$3,000,000 ÷ 10 = \$300,000. 59. d 8/10 = .8 > 75% of economic life. 60. c (\$102,000 - \$15,000) × 4.99271 = \$434,366. 61. c \$1,173,685 – \$200,000 = \$973,685 × .10 = \$97,369 \$973,685 – (\$200,000 – \$97,369) = \$871,054. 62. a (\$208,493 – \$50,000) × .10 = \$15,849. 63. b [\$158,493 – (\$50,000 - \$15,849)] × .10 = \$12,434. 64. d \$880,264 – \$150,000 = \$730,264. 65. c \$227,448 × .10 = \$22,745; (\$227,448 – 0) ÷ 7 = \$32,493. 66. c [\$227,448 – (\$60,000 – \$22,745)] × .10 = \$19,019. 67. d (\$450,000 – \$50,000) ÷ 8 = \$50,000. 68 a \$86,038 × 3.57710 = \$307,767. 69. c \$86,038 × 3.57710 = \$307,767 (\$307,767 – \$86,038) × .08 = \$17,738. 70. d \$86,038 × 3.57710 = \$307,767 \$86,038 – [(\$307,767 – \$86,038) × .08] = \$68,300. 71. c \$86,038 × 3.57710 = \$307,767 (\$307,767 – 0) ÷ 4 = \$76,942. 72. b (\$325,000 × .90) ÷ 3.99271 = \$73,259 \$73,259 × 3.99271 = \$292,502 \$292,502 × .08 = \$23,400. 21 - 28
Accounting for Leases DERIVATIONS — Computational (cont.) No. Answer Derivation 73. c \$325,000 – (325,000 × .40) = \$195,000 \$73,259 × 3.99271 = \$292,502 \$292,502 – [\$73,259 – (\$292,502 × .08)] = \$242,643. 74. a (\$325,000 × .90) ÷ 3.99271 = \$73,259 . 75. b \$155,213 × 2.48685 = \$385,991; \$385,991 ———— = 96% > 90%. \$400,000 76. b Conceptual. 77. c \$400,000 – [\$155,213 – (\$400,000 × .1)] = \$284,787. \$155,213 – (\$284,787 ×.1) = \$126,734. 78. a Fails to meet Group II requirements. 79. c Fair value = \$400,000. 80. d Conceptual. 81. a Hook: (\$60,000 × 6) + (\$75,000 × 6) – (4,800,000 ÷ 8) = \$210,000 Emley: (\$60,000) × 6 = \$(360,000) Terry: (\$75,000) × 6 = \$(450,000). 82. d \$720,000. 83. a \$720,000 – \$64,000 – \$360,000 = \$296,000. 84. d (\$40,000 × 3.99271) + (\$25,000 × .68508) = \$176,835. 85. b [\$400,000 – (\$40,000 × .50663)] ÷ 4.60478 = \$82,465. 86. b (\$40,000 × 3.99271) + (\$25,000 × .68508) = \$176,835. \$40,000 – (\$176,835 × .08) = \$25,853. 87. c (\$40,000 × 3.99271) + (\$25,000 × .68508) = \$176,835 \$40,000 – (\$176,835 × .08) = \$25,853 (\$176,835 – \$25,853) × .08 = \$12,079 Interest exp. 88. c \$8,800 – \$16,000 = (\$7,200). 89. c (\$525,000 – \$75,000) × .09 × 6/12 = \$20,250. 90. c \$560,000 – \$496,000 = \$64,000; (\$560,000 – \$80,000) × .09 × 6/12 = \$21,600. 21 - 29

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Test Bank for Intermediate Accounting, Thirteenth Edition DERIVATIONS — Computational (cont.) No. Answer Derivation 91. a \$4,500,000 1 10 2 4 = \$225,000. (\$4,500,000 – \$621,000) × .04 = \$155,160. 92. b \$4,500,000 – \$3,900,000 = \$600,000. (\$4,500,000 – \$621,000) × .04 = \$155,160. 93. c \$1,861,875 – \$1,650,000 = \$211,875. (\$1,861,875 – \$300,000) × .04 = \$62,475. 94. c Conceptual. 95. b \$40,000 \$400,000 ———— = 10% or ————— = 6.1446* \$400,000 \$65,098.13 *6.1446 = PV factor of ordinary annuity of \$1 for 10 years at 10%. 96. d [(\$400,000 – \$40,000) ÷ 15] + \$37,490 = \$61,490. 97. d \$316,925 (See amortization table.) *98. b (\$400,000 – \$360,000) ÷ 15 = \$2,667. *99. b \$7,000 × 6 = \$42,000. DERIVATIONS — CPA Adapted No. Answer Derivation 100. c Conceptual. 101. a (\$160,000 × 4.7908) – \$160,000 = \$606,528. 102. d \$2,502,000 – \$630,000 + \$30,000 = \$1,902,000 (2010). \$1,902,000 – [\$600,000 – (\$1,902,000 × .10)] = \$1,492,200 (2011). 103. a Conceptual. 104. d \$900,000 × .10 = \$90,000. 105. d \$900,000 ÷ 15 = \$60,000. 106. c Conceptual. 107. a \$770,000 – \$600,000 = \$170,000. *108. d Conceptual. 21 - 30
Accounting for Leases DERIVATIONS — CPA Adapted (cont.) No. Answer Derivation *109. d 000 , 900 \$ 000 , 85 \$ = 9.44%, < 10% of FV of asset it is a minor leaseback. EXERCISES Ex. 21-110 —Capital lease (Essay). Explain the procedures used by the lessee to account for a capital lease. Solution 21-110 When the capital lease method is used, the lessee treats the lease transactions as if the asset were being purchased. The asset and liability are recorded at the lower of (1) the present value of the minimum lease payments (excluding executory costs) or (2) the fair value of the asset at the inception of the lease.

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