E21-6 (Lessor Entries; Sales Type Lease) Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008. The lease is for an 8 year period and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 2008. Crosley had purchased the machine during 2007 for $160,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Crosley. Crosley set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 yrs with no residual value and reverts to Crosley at the termination of the lease.
Instructions
Prepare all necessary journal entries for Crosley for 2008.
Click here for the solution: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008
Showing posts with label machinery. Show all posts
Showing posts with label machinery. Show all posts
Wednesday, November 11, 2015
Friday, September 25, 2015
(ACC 422 Week 4) Jon Seceda Furnace Corp. purchased machinery for $315,000 on May 1, 2007
ACC 422 Week Four (Week 4)
E11-4 (Depreciation Computations—Five Methods) Jon Seceda Furnace Corp. purchased machinery for $315,000 on May 1, 2007. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2008 Seceda Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.
Instructions
From the information given, compute the depreciation charge for 2008 under each of the following methods. (Round to the nearest dollar.)
(a) Straight-line.
(b) Units-of-output.
(c) Working hours.
(d) Sum-of-the-years’-digits.
(e) Declining-balance (use 20% as the annual rate).
Click here for the solution: (ACC 422 Week 4) Jon Seceda Furnace Corp. purchased machinery for $315,000 on May 1, 2007
E11-4 (Depreciation Computations—Five Methods) Jon Seceda Furnace Corp. purchased machinery for $315,000 on May 1, 2007. It is estimated that it will have a useful life of 10 years, salvage value of $15,000, production of 240,000 units, and working hours of 25,000. During 2008 Seceda Corp. uses the machinery for 2,650 hours, and the machinery produces 25,500 units.
Instructions
From the information given, compute the depreciation charge for 2008 under each of the following methods. (Round to the nearest dollar.)
(a) Straight-line.
(b) Units-of-output.
(c) Working hours.
(d) Sum-of-the-years’-digits.
(e) Declining-balance (use 20% as the annual rate).
Click here for the solution: (ACC 422 Week 4) Jon Seceda Furnace Corp. purchased machinery for $315,000 on May 1, 2007
Wednesday, July 15, 2015
Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment
E10-5 (Treatment of Various Costs) Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.
Abstract company’s fee for title search $ 520
Architect’s fees 3,170
Cash paid for land and dilapidated building thereon 92,000
Removal of old building $20,000
Less: Salvage 5,500 14,500
Interest on short-term loans during construction 7,400
Excavation before construction for basement 19,000
Machinery purchased (subject to 2% cash discount, which was not taken) 65,000
Freight on machinery purchased 1,340
Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 2,180
New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000
Assessment by city for drainage project 1,600
Hauling charges for delivery of machinery from storage to new building 620
Installation of machinery 2,000
Trees, shrubs, and other landscaping after completion of building (permanent in nature) 5,400
Instructions
Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicate how any costs not debited to these accounts should be recorded.
Click here for the solution: Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment
Abstract company’s fee for title search $ 520
Architect’s fees 3,170
Cash paid for land and dilapidated building thereon 92,000
Removal of old building $20,000
Less: Salvage 5,500 14,500
Interest on short-term loans during construction 7,400
Excavation before construction for basement 19,000
Machinery purchased (subject to 2% cash discount, which was not taken) 65,000
Freight on machinery purchased 1,340
Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 2,180
New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000
Assessment by city for drainage project 1,600
Hauling charges for delivery of machinery from storage to new building 620
Installation of machinery 2,000
Trees, shrubs, and other landscaping after completion of building (permanent in nature) 5,400
Instructions
Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicate how any costs not debited to these accounts should be recorded.
Click here for the solution: Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment
Wednesday, June 24, 2015
(Lessee-Lessor Entries, Sales-Type Lease) Glaus Leasing Company agrees to lease machinery to Jensen Corporation on January 1, 2010
Problem 21-1 (P21-1) (Lessee-Lessor Entries, Sales-Type Lease) Glaus
Leasing Company agrees to lease machinery to Jensen Corporation on
January 1, 2010. The following information relates to the lease
agreement.
1 The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years
2 The cost of the machinery is $ 525,000, and the fair value of the asset on January 1, 2010, is $700,000.
3 At the end of the lease term the asset reverts to the lessor. At the end of the lease term the asset has guaranteed residual value of $ 100,000. Jensen depreciates all if its equipment on a straight-line basis
4 The lease agreement requires equal annual rental payments, beginning on January 1, 2010.
5 The collectability of the lease payments is reasonable predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.
6 Glaus desires a 10% rate of return on its investments. Jensen's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.
Instructions:
(Assume the accounting period ends on December 31)
(a.) Discuss the nature of this lease for both the lessee and the lessor.
(b.) Calculate the amount of the annual rental payment required.
(c.) Compute the present value of the minimum lease payments.
(d.) Prepare the journal entries Jensen would make in 2010 and 2011 related to the lease arrangements.
(e.) Prepare the journal entries Glaus would make in 2010 and 2011.
Click here for the solution: (Lessee-Lessor Entries, Sales-Type Lease) Glaus Leasing Company agrees to lease machinery to Jensen Corporation on January 1, 2010
1 The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years
2 The cost of the machinery is $ 525,000, and the fair value of the asset on January 1, 2010, is $700,000.
3 At the end of the lease term the asset reverts to the lessor. At the end of the lease term the asset has guaranteed residual value of $ 100,000. Jensen depreciates all if its equipment on a straight-line basis
4 The lease agreement requires equal annual rental payments, beginning on January 1, 2010.
5 The collectability of the lease payments is reasonable predictable, and there are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.
6 Glaus desires a 10% rate of return on its investments. Jensen's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown.
Instructions:
(Assume the accounting period ends on December 31)
(a.) Discuss the nature of this lease for both the lessee and the lessor.
(b.) Calculate the amount of the annual rental payment required.
(c.) Compute the present value of the minimum lease payments.
(d.) Prepare the journal entries Jensen would make in 2010 and 2011 related to the lease arrangements.
(e.) Prepare the journal entries Glaus would make in 2010 and 2011.
Click here for the solution: (Lessee-Lessor Entries, Sales-Type Lease) Glaus Leasing Company agrees to lease machinery to Jensen Corporation on January 1, 2010
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