Hope Manufacturing Company and Charity Co... Machinery for Lease, net of Accum.. Provident Company Lessor’s Books 2009... Diana Corporation b Amortization Table Date Total Annual Paymen
Trang 1PROBLEMS 4-1 (Hope Manufacturing Company and Charity Co.)
(a) Lessor’s Books
2009
2 M/5 = 400,000
2 M x 30% = 600,000
(2.2 M – 200,000)/10 200,000 60,000 / 5 years 12,000 Total 212,000 2010
2,000,000 x 20%
Lessee’s Books
2009
2010
(b)
Statement of Financial Position Hope Charity
Trang 2Machinery for Lease, net of Accum
4-2 (Blessed Realty)
Total 126,000 ÷ 12 mos.
No of mos From Sept 1 – Dec 31, 2005 x 4
Rent payments made during 2006 30,000 Rent Payable at December 31, 2006 12,000 4-3 (Faith Company)
Rent Expense for 2009 (540,000 x 4/60) 36,000 or
Less lease bonus (60,000/60 mos.) (1,000)
No of months for Sept 1- Dec 31 x 4
Rent Expense for 2010 (9,000 x 12) 108,000 (b) Faith Company
2009
2010 Mar 1 - Dec 1 monthly entry
Rent expense for 2009:
540,000 x 12/60 108,000 Payments in 2007 100,000 Increase in rent payable 8,000
Love Corporation 2009
Trang 3Dec 31 Rent Receivable 36,000
2010 Mar 1 - Dec 1 monthly entry
4-4 (Way Company)
Additional rent 5% (6 M – 5 M) 50,000 Amortization of lease bonus
Rent Expense for 2007 1,022,500
b Prepaid Rent Expense
125,000 – 12,500 112,500 Security Deposit
(discounted for 4 more years at 10%) 150,000 x 68301 = 102,452
4-5 (Truth Corporation)
Depreciation Expense 3,500,000/6 = 583,333
Maintenance and other related costs ( 50,000)
4-6 (Provident Company)
Lessor’s Books
2009
Trang 4Oct 1 Cash 54,000
54,000 x 33/36 = 49,500
(1,500,000 / 10) x 6/12
Lessee’s Books
2009
4-7 (Generous, Inc.)
260,000 x 4.24
1,102,400 200,000 x 0.65 130,000
Total capitalized cost 1,232,400
(a) Amortization Table
Date Total Annual Payment Interest
Expense
Reduction in Principal Lease
Obligation
Trang 501/01/11 260,000 71,992 188,008 611,908
-*Adjusted; difference is due to rounding off.
(b)
2009
1 Finance Lease Obligation 260,000
(1,232,400-200,000)/5 2010
(c)
Dec 31 Accumulated Depreciation 1,032,400
d
4-8 (Diana Corporation)
(b) Amortization Table
Date Total Annual Payment Expense Interest Reduction in Principal Obligation Lease
Trang 601/01/09 - - 361,447
-*Adjusted; difference is due to rounding off.
(c)
2009
1 Finance Lease Obligation 86,680
361,447/5 years 2010
(d)
Property, Plant and Equipment
Current Liabilities:
Noncurrent Liabilities:
Income Statement
4-9 (Riza, Inc.)
(a) 1,011,840/135,000 = 7.4951 PV of an annuity due for 12 periods
From Table VI across 12 periods, 7.4951 is under 10% interest rate (b)
Trang 7Date Payment Interest
Expense Principal Obligation
(c) (1,011,840 – 40,000) / 15 years = 64,789
(d)
12/31/09 Finance Lease Obligation 135,000
(1,011,840 – 40,000) / 15 (e) Lease Obligation as of December 31, 2010:
4-10 (Shirley Corporation)
Total capitalized cost 741,630 (b)
Date Total Annual Payment Expense Interest Reduction in Principal Obligation Lease
-*Adjusted; difference is due to rounding off.
(d)
Trang 81 Finance Lease Obligation 150,000
2010
(e)
(f)2013
4-11 (Joy Company-lESSOR)
a
2009
1 Unearned Interest Revenue 1,900
Trang 9Dec 31 Unearned Interest Revenue 15,913
38,192 x 5/12
Partial Amortization Table
Date Payment Periodic Interest Reduction in Principal Balance of Principal
(b) As of December 31, 2009:
Total Current Non-current Finance Lease Receivable P505,000 P100,000 P405,000 Unearned Interest Revenue 107,187 22,279 84,908
P397,813 P 77,721 P320,092 Current portion:
Accrued interest, 12/31/09 15,913
P 77,721 4-12 (Glad Manufacturing Company)
(a)
2009
Apr 1 Finance Lease Receivable 1,500,000
175,000 x 8 = 1,400,000 1,400,000 + 100,000 = 1,500,000 940,000–(100,000 x0.4665)=893,350 175,000 x 5.8684 = 1,026,970
100,000 x 0.4665 = 46,650 1,026,970 + 46,650 = 1,073,620 1,500,000 – 1,073,620 = 426,380
Trang 10Dec 31 Unearned Interest Revenue 67,397
(1,073,620-175,000) x 10% x 9/12
2010
1,073,620-175,000=898,620 898,620 x 10% = 89,862
898,620-175,000+89,862 =813,482 813,482 x 10% x 9/12 = 61,011
*The compound entry may also be presented as follows:
Apr 1 Finance Lease Receivable 1,400,000
1 Finance Lease Receivable 100,000
Cost of Sales (940,000 – 46,650) 893,350
(ii) Interest Revenue for 2006 (see journal entries) 67,397
Cost of Sales (cost of the asset) 940,000 4-13 (Prudent Company)
(c) Interest Revenue for 2009
(1,011,840 – 135,000) x 10% x 6/12 43,842
Trang 11Less Unearned Interest Revenue 564,318 Net Finance Lease Receivable, December 31, 2009 920,682 4-14 (Jackie Chan and Chris Tucker)
Annual Lease Payment:
PV factor (Annuity due for 5 years at 10%) ÷4.1699
Date Payment Periodic Interest Reduction in Principal Balance of Principal
Depreciable cost = P600,000 – P20,000 = P580,000
2009 Depreciation = P580,000 x 6/21 = P165,714
2010 Depreciaiton = P580,000 x 5/21 = 138,095
(a) Books of Chris Tucker
2009
1 Finance Lease Obligation 137,932
31 Depreciation Expense – Leased Equipment 165,714
Accumulated Depreciation – Leased Equipment 165,714 2010
Jan 1 Finance Lease Obligation 91,725
Interest Payable 46,207
Dec 31 Interest Expense 37,034
Depreciation Expense 138,095
Accumulated Depreciation – Leased Equipment 138,095
Trang 12(b) Books of Jackie Chan
2009
Jan 1 Finance Lease Receivable 729,660
Dec 31 Unearned Interest Revenue 46,207
2010
Dec 31 Unearned Interest Revenue 37,034
4.15 Ruby Company
a Manufacturer’s or dealer’s lease
b Present value of MLP = 850,365 x 4.6048 P3,914,080
Present value of Residual value = 166,300 x 5066 84,248
Lease arrangement cost (initial direct cost) ( 85,000) Interest income 3,998,328 x 12% x 3/12 119,950
Date Payment Periodic Interest Reduction in Principal Balance of Principal
2009
Oct 1 Finance Lease Receivable (850,365 x 6) + 166,300 5,268,490
Cost of Goods Sold (3,200,000 – 84,248) 3,115,752
Trang 13Oct 1 Selling Expense 85,000
Dec 31 Unearned Interest Revenue 94,349
2010
Dec 31 Unearned Interest Revenue 363,578
(377,756 – 94,439) + (321,042 x 3/12)
d Amortization Table
Date Payment Periodic Interest Reduction in Principal Balance of Principal
2009
367,646 x 3/12 = 91,912
31 Depreciation Expense 163,087
3,914,080/6 x 3/12 2010
Interest Expense 367,646 – 91,912 275,734
Finance Lease Obligation 482,719
309,720 x 3/12
Trang 144-16 (Legend Company)
(a) Selling price of the machinery (150,000 x 4.0373) 605,595 (b) Deferred gain on January 1, 2009
(c) Depreciation Expense for 2009
(d) Interest Expense for 2009
(e) Gain on sale-leaseback for 2009
4-17 (Honest Company)
(a)
2009
(b)
Trang 15Unearned Profit on Sale Leaseback 40,000
31 Unearned Profit on Sale Leaseback 5,000
(40,000/4) x 6/12 (c)
2009
(d)
2009
Deferred Loss on Sale Leaseback 100,000
Deferred Loss on Sale Leaseback 12,500 100,000 x 6/48 = 12,500
MULTIPLE CHOICE QUESTIONS
Theory
Trang 16MC7 A MC19 C
Problems
MC25 C 900,000 + (500,000 / 5 yrs) = 1,000,000
MC26 C 40,000 + (125,000 x 4) = 540,000; 540,000 / 5 yrs = 108,000
MC27 D This is an operating lease; thus, there is no interest expense involved.
MC28 D 240,000 x 6/12 = 120,000
MC29 C 3,600,000 / 3 yrs = 1,200,000
MC30 B 3,600,000 x 2/3 = 2,400,000; 600,000 + 900,000 = 1,500,000
2,400,000 – 1,500,000 = 900,000 MC31 B 500,000 x 4.61 = 2,305,000
MC32 D 2,305,000 – 500,000 – 283,400 = 1,521,600; 500,000 – (12% x
1,805,000)=283,400 MC33 A 2,305,000 / 6 = 384,167
MC34 B 1,350,000-200,000=1,150,000; 1,150,000 x 10% = 115,000
200,000-115,000 = 85,000 MC35 B 400,000 x 5.95 = 2,380,000
MC36 D (2,400,000 – 200,000) / 8 yrs = 275,000
MC37 A 100,000 x 6 = 600,000
MC38 D 100,000 x 4.8 = 480,000; 480,000 – 100,000 = 380,000
380,000 x 10% x 5/12 = 15,833 MC39 C 3,520,000 – 2,800,000 = 720,000
MC40 A 3,520,000 – 600,000 = 2,920,000; 2,920,000 x 10% x 6/12 = 146,000
MC41 A In the absence of any statement, the sales price is assumed to be at fair value MC42 A 323,400 / 4.312 = 75,000; 75,000 x 5 = 375,000; 375,000 – 323,400 = 51,600 MC43 A 4,800,000 – 3,600,000 = 1,200,000
MC44 B 1,200,000 /12 x 6/12 = 50,000
MC45 B 150,000 – 100,000 = 50,000; 50,000 x 9/10 = 45,000
MC46 D 98,512 x 10% = 9,851; 30,000-9,851 =20,149; 98,512-20,149=78,363
78,363 x 10% = 7,836 MC47 C (98,512-5,000) / 4 = 23,378
MC48 D (30,000 x 2) + 5,000 = 65,000
Theory: 24 + 4 = 28 + 22 x 2 = 44 +28 = 72 +3 = 75