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    21p 4sol

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    rimasinghani
    1) The document provides details of a 7-year lease agreement between Alschuler Leasing Company and McKee Electronics. It includes the lease terms, amounts, and an amortization schedule. 2) It asks the reader to determine specific line items and amounts that would appear on McKee Electronics' income statements and balance sheets for years ending September 30, 2008, 2009, and 2010. 3) The responses show interest expense, lease executory costs, and depreciation expense on the income statements, and current/long-term lease liabilities, leased asset, and accumulated depreciation on the balance sheets.

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    21p 4sol

    Uploaded by

    rimasinghani
    2K views3 pages
    1) The document provides details of a 7-year lease agreement between Alschuler Leasing Company and McKee Electronics. It includes the lease terms, amounts, and an amortization schedule. 2) It asks the reader to determine specific line items and amounts that would appear on McKee Electronics' income statements and balance sheets for years ending September 30, 2008, 2009, and 2010. 3) The responses show interest expense, lease executory costs, and depreciation expense on the income statements, and current/long-term lease liabilities, leased asset, and accumulated depreciation on the balance sheets.

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    21p-4Sol (2)(1)

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    1) The document provides details of a 7-year lease agreement between Alschuler Leasing Company and McKee Electronics. It includes the lease terms, amounts, and an amortization schedule. 2) It asks the reader to determine specific line items and amounts that would appear on McKee Electronics' income statements and balance sheets for years ending September 30, 2008, 2009, and 2010. 3) The responses show interest expense, lease executory costs, and depreciation expense on the income statements, and current/long-term lease liabilities, leased asset, and accumulated depreciation on the balance sheets.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2K views3 pages

    21p 4sol

    Uploaded by

    rimasinghani
    1) The document provides details of a 7-year lease agreement between Alschuler Leasing Company and McKee Electronics. It includes the lease terms, amounts, and an amortization schedule. 2) It asks the reader to determine specific line items and amounts that would appear on McKee Electronics' income statements and balance sheets for years ending September 30, 2008, 2009, and 2010. 3) The responses show interest expense, lease executory costs, and depreciation expense on the income statements, and current/long-term lease liabilities, leased asset, and accumulated depreciation on the balance sheets.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    Name: 19

    Problem: P21-4, Balance Sheet and Income Statement


    Disclosure - Lessee, File 21p-4
    Course: X120C Intermediate Accounting III
    Date: Homework #5
    Select your name from the pull-down menu; no other input will work. If your name is not on the list or
    you can't select it use one of the numbered lines at the end of the list instead. If you use a number
    you will need to hand-write your name on the hard copy before you turn it in.

    Round all amounts in the homework assignment to the nearest dollar ($1), except percentages.

    The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and
    McKee Electronics, a lessee, for a computer system.

    Inception date: 10/01/07


    Lease term: 7 years
    Economic life of lease equipment: 7 years
    Fair value of asset at October 1, 2007: $214,746
    Residual value at end of lease term: $0
    Lessor's implicit rate: 11%
    Lessee's incremental borrowing rate: 10%
    Annual lease payment due at the beginning of each year,
    beginning with October 1, 2007: $40,100

    The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties
    surrounding the costs yet to be incurred by the lessor. The lessee assumes
    responsibility for all executory costs, which amount to $2,700 per year, and are paid each
    October 1, beginning October 1, 2007. (This $2,700 is not included in the rental payment of $40,100.) The
    asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used
    for all equipment.
    The following amortization schedule has been prepared correctly for use by both the lessor and the
    lessee in accounting for this lease. The lease is to be accounted for properly for property as a capital
    lease by the lessee and as a direct-finance lease by the lessor.

    Interest
    Reduction of Balance of
    (10%) on
    Annual lease Lease Lease
    Unpaid
    Date: Payment / Obligation / Obligation /
    Obligation /
    Receipt: Net Net
    Net
    Investment: Investment:
    investment:
    10/01/07 $214,746
    1 10/01/07 $40,100 $40,100 174,646
    2 10/01/08 40,100 $17,465 22,635 152,011
    3 10/01/09 40,100 15,201 24,899 127,112
    4 10/01/10 40,100 12,711 27,389 99,723
    5 10/01/11 40,100 9,972 30,128 69,595
    6 10/01/12 40,100 6,960 33,140 36,455
    7 10/01/13 40,100 3,645 36,455 0
    $280,700 $65,954 $214,746

    Problem 21-4 Solution, Page 1 of 3, 11/13/2010, 6:04 PM


    Name: 19
    Problem: P21-4, Balance Sheet and Income Statement
    Disclosure - Lessee, File 21p-4
    Course: X120C Intermediate Accounting III
    Date: Homework #5

    Instructions:
    (a) Assuming the lessee's accounting period ends on September 30, answer the following questions
    with respect to this lease agreement:

    (1) What items and amounts will appear on the lessee's income statement for the year ending
    September 30, 2008?

    Interest expense (See amortization schedule) $17,465


    Lease executory expense $2,700
    Depreciation expense ($214,746 ÷ 7 = $30,678) $30,678

    (2) What items and amounts will appear on the lessee's balance sheet at September 30, 2008?

    Current liabilities:
    Lease liability $22,635
    Interest payable $17,465

    Long-term liabilities:
    Lease liability $152,011

    Property, plant and equipment:


    Leased computer under capital lease $214,746
    Accumulated depreciation $30,678

    (3) What items and amounts will appear on the lessee's income statement for the year ending
    September 30, 2009?

    Interest expense (See amortization schedule) $15,201


    Lease executory expense $2,700
    Depreciation expense ($214,746 ÷ 7 = $30,678) $30,678

    (4) What items and amounts will appear on the lessee's balance sheet at September 30, 2009?

    Current liabilities:
    Lease liability $24,899
    Interest payable $15,201

    Long-term liabilities:
    Lease liability $127,112

    Property, plant and equipment:


    Leased computer under capital lease $214,746

    Problem 21-4 Solution, Page 2 of 3, 11/13/2010, 6:04 PM


    Name: 19
    Problem: P21-4, Balance Sheet and Income Statement
    Disclosure - Lessee, File 21p-4
    Course: X120C Intermediate Accounting III
    Date: Homework #5
    Accumulated depreciation $61,356

    (5) What items and amounts will appear on the lessee's income statement for the year ending
    September 30, 2010?

    Interest expense (See amortization schedule) $12,711


    Lease executory expense $2,700
    Depreciation expense ($214,746 ÷ 7 = $30,678) $30,678

    (6) What items and amounts will appear on the lessee's balance sheet at September 30, 2010?

    Current liabilities:
    Lease liability $27,389
    Interest payable $12,711

    Long-term liabilities:
    Lease liability $99,723

    Property, plant and equipment:


    Leased computer under capital lease $214,746
    Accumulated depreciation $92,034

    Problem 21-4 Solution, Page 3 of 3, 11/13/2010, 6:04 PM

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