E21-2 Lessee Accounting Issues
The Sax Company signs a lease agreement dated January 1, 2010 that provides for it to lease computers from the Appleton Company beginning January 1, 2010. The lease terms, provision, and related events are as follows:
a)The lease term is five years. The lease is non-cancelable and requires equal rental payments to be made at the end of each year.
b)The computers have an estimated life of five years, a fair value of $300,000, and a zero estimated residual value.
c) Sax Company agrees to pay all executor costs.
d) The lease contains no renewal or bargain purchase option.
e) The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. The Sax Company is aware of this rate, which is equal to its borrowing rate.
f) Sax Company uses the straight-line method to record depreciation on similar equipment.
REQUIRED:
1. Determine what type of lease this is for Sax Company.
2. Calculate the amount of the asset and liability of the Sax Company at the inception of the lease (round to the nearest dollar).
Click here for the solution: The Sax Company signs a lease agreement dated January 1, 2010 that provides for it to lease computers from the Appleton Company beginning January 1, 2010
Showing posts with label dated. Show all posts
Showing posts with label dated. Show all posts
Tuesday, April 12, 2016
Wednesday, October 14, 2015
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2011
P 12-1 Securities held-to-maturity; bond investment; effective interest
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2011. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2011, was $70 million.
Required:
1. Prepare the journal entry to record Fuzzy Monkey's investment on January 1, 2011.
2. Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2011 (at the effective rate).
3. Prepare the journal entries by Fuzzy Monkey to record interest on December 31, 2011 (at the effective rate).
4. At what amount will Fuzzy Monkey report its investment in the December 31, 2011, balance sheet? Why?
5. How would Fuzzy Monkey's 2011 statement of cash flows be affected by this investment?
Click here for the solution: Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2011
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2011. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2011, was $70 million.
Required:
1. Prepare the journal entry to record Fuzzy Monkey's investment on January 1, 2011.
2. Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2011 (at the effective rate).
3. Prepare the journal entries by Fuzzy Monkey to record interest on December 31, 2011 (at the effective rate).
4. At what amount will Fuzzy Monkey report its investment in the December 31, 2011, balance sheet? Why?
5. How would Fuzzy Monkey's 2011 statement of cash flows be affected by this investment?
Click here for the solution: Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January 1, on January 1, 2011
Tuesday, September 8, 2015
Prepare a table with the following headings for a monthly bank reconciliation dated September 30
ACC 225 Week 8
Exercise 8-6
Prepare a table with the following headings for a monthly bank reconciliation dated September 30:
For each item 1 through 12, place an x in the appropriate column to indicate whether the item should be added to or deducted from the book or bank balance, or whether it should not appear on the reconciliation. If the book balance is to be adjusted, place a Dr. or Cr. in the Adjust column to indicate whether the Cash balance should be debited or credited. At the left side of your table, number the items to correspond to the following list.
1. Bank service charge.
2. Checks written and mailed to payees on October 2.
3. Checks written by another depositor but charged against this company’s account.
4. Principal and interest on a note collected by the bank but not yet recorded by the company.
5. Special bank charge for collection of note in part 4 on this company’s behalf.
6. Check written against the company’s account and cleared by the bank; erroneously not recorded by the company’s recordkeeper.
7. Interest earned on the cash balance in the bank.
8. Night deposit made on September 30 after the bank closed.
9. Checks outstanding on August 31 that cleared the bank in September.
10. NSF check from customer returned on September 25 but not yet recorded by this company.
11. Checks written by the company and mailed to payees on September 30.
12. Deposit made on September 5 and processed by the bank on September 6.
Click here for the solution: Prepare a table with the following headings for a monthly bank reconciliation dated September 30
Exercise 8-6
Prepare a table with the following headings for a monthly bank reconciliation dated September 30:
For each item 1 through 12, place an x in the appropriate column to indicate whether the item should be added to or deducted from the book or bank balance, or whether it should not appear on the reconciliation. If the book balance is to be adjusted, place a Dr. or Cr. in the Adjust column to indicate whether the Cash balance should be debited or credited. At the left side of your table, number the items to correspond to the following list.
1. Bank service charge.
2. Checks written and mailed to payees on October 2.
3. Checks written by another depositor but charged against this company’s account.
4. Principal and interest on a note collected by the bank but not yet recorded by the company.
5. Special bank charge for collection of note in part 4 on this company’s behalf.
6. Check written against the company’s account and cleared by the bank; erroneously not recorded by the company’s recordkeeper.
7. Interest earned on the cash balance in the bank.
8. Night deposit made on September 30 after the bank closed.
9. Checks outstanding on August 31 that cleared the bank in September.
10. NSF check from customer returned on September 25 but not yet recorded by this company.
11. Checks written by the company and mailed to payees on September 30.
12. Deposit made on September 5 and processed by the bank on September 6.
Click here for the solution: Prepare a table with the following headings for a monthly bank reconciliation dated September 30
Saturday, August 22, 2015
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2011
E 12-19 Fair value option; held-to-maturity investments
[This is a variation of Exercise 12-1 focusing on the fair value option.]
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2011. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2011, was $210 million.
Required:
1. Would this investment be classified on Tanner-UNF's balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other? Explain.
2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2011.
3. Prepare the journal entries by Tanner-UNF to record interest on December 31, 2011, at the effective (market) rate.
4. Prepare any journal entry necessary to recognize fair value changes as of December 31, 2011.
5. At what amount will Tanner-UNF report its investment in the December 31, 2011, balance sheet? Why?
6. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2012, for $190 million. Prepare the journal entry to record the sale.
Click here for the solution: Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2011
[This is a variation of Exercise 12-1 focusing on the fair value option.]
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2011. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2011, was $210 million.
Required:
1. Would this investment be classified on Tanner-UNF's balance sheet as held-to-maturity securities, trading securities, available-for-sale securities, significant-influence investments, or other? Explain.
2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2011.
3. Prepare the journal entries by Tanner-UNF to record interest on December 31, 2011, at the effective (market) rate.
4. Prepare any journal entry necessary to recognize fair value changes as of December 31, 2011.
5. At what amount will Tanner-UNF report its investment in the December 31, 2011, balance sheet? Why?
6. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2012, for $190 million. Prepare the journal entry to record the sale.
Click here for the solution: Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2011
Tuesday, August 18, 2015
On October 1, 2010, Noller Company issued $3,000,000 par value, 10%, 10-year bonds dated July 1, 2010, with interest payable semiannually on January 1 and July 1
On October 1, 2010, Noller Company issued $3,000,000 par value, 10%, 10-year bonds dated July 1, 2010, with interest payable semiannually on January 1 and July 1. The bonds are issued at $3,406,500 (to yield 8%) plus accrued interest. The effective interest method is used.
(a) Prepare the journal entry at the date the bonds are issued.
(c) Prepare the entry for the interest payment on January 1, 2011.
(b) Prepare the adjusting entry at December 31, 2010, the end of the fiscal year.
Click here for the solution: On October 1, 2010, Noller Company issued $3,000,000 par value, 10%, 10-year bonds dated July 1, 2010, with interest payable semiannually on January 1 and July 1
(a) Prepare the journal entry at the date the bonds are issued.
(c) Prepare the entry for the interest payment on January 1, 2011.
(b) Prepare the adjusting entry at December 31, 2010, the end of the fiscal year.
Click here for the solution: On October 1, 2010, Noller Company issued $3,000,000 par value, 10%, 10-year bonds dated July 1, 2010, with interest payable semiannually on January 1 and July 1
Monday, August 17, 2015
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011
E 14-10 Issuance of bonds; effective interest; amortization schedule
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011. The bonds mature in 2014 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2011.
2. Prepare the journal entry to record their issuance by National on January 1, 2011.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2011.
5. Prepare the appropriate journal entries at maturity on December 31, 2014.
Click here for the solution: National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011. The bonds mature in 2014 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2011.
2. Prepare the journal entry to record their issuance by National on January 1, 2011.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2011.
5. Prepare the appropriate journal entries at maturity on December 31, 2014.
Click here for the solution: National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2011
On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000
E 14-11 Bonds; effective interest; adjusting entry
On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000. The bonds sold for $731,364 and mature on January 31, 2031 (20 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid semiannually on July 31 and January 31. Strauss-Lombardi's fiscal year ends December 31.
Required:
1. Prepare the journal entry to record their issuance by Strauss-Lombardi on February 1, 2011.
2. Prepare the journal entry to record interest on July 31, 2011 (at the effective rate).
3. Prepare the adjusting entry to accrue interest on December 31, 2011.
4. Prepare the journal entry to record interest on January 31, 2012.
Click here for the solution: On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000
On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000. The bonds sold for $731,364 and mature on January 31, 2031 (20 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid semiannually on July 31 and January 31. Strauss-Lombardi's fiscal year ends December 31.
Required:
1. Prepare the journal entry to record their issuance by Strauss-Lombardi on February 1, 2011.
2. Prepare the journal entry to record interest on July 31, 2011 (at the effective rate).
3. Prepare the adjusting entry to accrue interest on December 31, 2011.
4. Prepare the journal entry to record interest on January 31, 2012.
Click here for the solution: On February 1, 2011, Strauss-Lombardi issued 9% bonds, dated February 1, with a face amount of $800,000
On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000
E 14-12 Bonds; straight-line method; adjusting entry
On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000. The bonds sold for $294,000 and mature on February 28, 2031 (20 years). Interest is paid semiannually on August 31 and February 28. Stratford uses the straight-line method and its fiscal year ends December 31.
Required:
1. Prepare the journal entry to record the issuance of the bonds by Stratford Lighting on March 1, 2011.
2. Prepare the journal entry to record interest on August 31, 2011.
3. Prepare the journal entry to accrue interest on December 31, 2011.
4. Prepare the journal entry to record interest on February 28, 2012.
Click here for the solution: On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000
On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000. The bonds sold for $294,000 and mature on February 28, 2031 (20 years). Interest is paid semiannually on August 31 and February 28. Stratford uses the straight-line method and its fiscal year ends December 31.
Required:
1. Prepare the journal entry to record the issuance of the bonds by Stratford Lighting on March 1, 2011.
2. Prepare the journal entry to record interest on August 31, 2011.
3. Prepare the journal entry to accrue interest on December 31, 2011.
4. Prepare the journal entry to record interest on February 28, 2012.
Click here for the solution: On March 1, 2011, Stratford Lighting issued 14% bonds, dated March 1, with a face amount of $300,000
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