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    Francis Lloyd Tongson
    The document shows the accounting journal entries for three companies - East Company (head lessor), West Company (intermediate lessor), and North Company (lessee) - related to a multi-level leasing arrangement over the years 2020 to 2023. It includes entries for rent payments and receipts, initial direct costs, depreciation, amortization, and other related accounts.

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    Write Your Final Answers Below

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    Francis Lloyd Tongson
    36 views24 pages
    The document shows the accounting journal entries for three companies - East Company (head lessor), West Company (intermediate lessor), and North Company (lessee) - related to a multi-level leasing arrangement over the years 2020 to 2023. It includes entries for rent payments and receipts, initial direct costs, depreciation, amortization, and other related accounts.

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    francohma-6

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    The document shows the accounting journal entries for three companies - East Company (head lessor), West Company (intermediate lessor), and North Company (lessee) - related to a multi-level leasing arrangement over the years 2020 to 2023. It includes entries for rent payments and receipts, initial direct costs, depreciation, amortization, and other related accounts.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    36 views24 pages

    Write Your Final Answers Below

    Uploaded by

    Francis Lloyd Tongson
    The document shows the accounting journal entries for three companies - East Company (head lessor), West Company (intermediate lessor), and North Company (lessee) - related to a multi-level leasing arrangement over the years 2020 to 2023. It includes entries for rent payments and receipts, initial direct costs, depreciation, amortization, and other related accounts.

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    © All Rights Reserved
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    WRITE YOUR FINA

    DATE
    2020
    Jan 1

    Dec 31

    31

    31

    31

    2021
    Jan 1

    Dec 31

    31

    31
    2022
    Jan 1

    Dec 31

    31

    31

    2023
    Jan 1

    31
    WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS B

    EAST COMPANY
    ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
    2020
    Machinery (350,000 + 10,000) 360,000 Jan 1 Rent expense
    Cash 360,000

    Cash 60,000 1 Rent deposit


    Rent income 60,000

    Deferred initial direct cost 6,000 1 Prepaid rent


    Cash 6,000

    Cash 30,000
    Liability for rent deposit 30,000

    Cash 15,000
    Unearned rent income 15,000

    Insurance 5,000 Dec 31 Rent expense


    Cash 5,000

    Depreciation (360,000/12) 30,000


    Accumulated depreciation 30,000

    Unearned rent income 5,000


    Rent income (15,000/3) 5,000

    Amortization of deferred initial direct cost 2,000


    Deferred initial direct cost (6,000/3) 2,000

    2021
    Cash 60,000 Jan 1 Rent expense
    Rent income 60,000

    1 Cash

    1 Deferred initial direct cost

    Depreciation (360,000/12) 30,000 Dec 31 Rent expense


    Accumulated depreciation 30,000

    Unearned rent income 5,000 31 Amortization of deferred initial di


    Rent income (15,000/3) 5,000

    Amortization of deferred initial direct cost 2,000


    Deferred initial direct cost (6,000/3) 2,000
    2022
    Cash 60,000 Jan 1 Rent expense
    Rent income 60,000

    1 Cash

    1 Deferred initial direct cost

    Depreciation (360,000/12) 30,000 Dec 31 Rent expense


    Accumulated depreciation 30,000

    Unearned rent income 5,000 31 Amortization of deferred initial di


    Rent income (15,000/3) 5,000

    Amortization of deferred initial direct cost 2,000


    Deferred initial direct cost (6,000/3) 2,000

    2023
    Liability for rent deposit 30,000 Jan 1 Cash
    Cash 30,000

    Depreciation (360,000/12) 30,000


    Accumulated depreciation 30,000
    E YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW

    WEST COMPANY
    ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
    2020
    Rent expense 60,000 Jan 1 No entry
    Cash 60,000

    Rent deposit 30,000


    Cash 30,000

    Prepaid rent 15,000


    Cash 15,000

    Rent expense 5,000 Dec 31 No entry


    Prepaid rent 5,000

    Rent expense 60,000 2021


    Cash 60,000 Jan 1 Rent expense

    70,000
    Rent income 70,000

    Deferred initial direct cost 6,000


    Cash 6,000

    Rent expense 5,000 Dec 31 No entry


    Prepaid rent 5,000

    Amortization of deferred initial direct cost 3,000


    Deferred initial direct cost (6,000/2) 3,000
    2022
    Rent expense 60,000 Jan 1 Rent expense
    Cash 60,000

    70,000
    Rent income 70,000

    Deferred initial direct cost 6,000


    Cash 6,000

    Rent expense 5,000 Dec 31 No entry


    Prepaid rent 5,000

    Amortization of deferred initial direct cost 3,000


    Deferred initial direct cost (6,000/2) 3,000

    2023
    30,000 Jan 1 No entry
    Rent deposit 30,000
    E YOUR FINAL ANSWERS BELOW

    NORTH COMPANY
    ACCOUNT TITLE DEBIT CREDIT

    No entry

    No entry

    Rent expense 70,000


    Cash 70,000

    No entry
    Rent expense 70,000
    Cash 70,000

    No entry

    No entry
    Requirement 2:
    EAST COMPANY (Head Lessor)
    2020 2021 2022 2023
    Rent income 65,000.00 65,000.00 65,000.00 -
    Insurance (5,000.00) - - -
    Depreciation (30,000.00) (30,000.00) (30,000.00) -
    Amortization (2,000.00) (2,000.00) (2,000.00) -
    Net rent income 28,000.00 33,000.00 33,000.00 -

    Insurance 5,000.00 - - -
    Depreciation 30,000.00 30,000.00 30,000.00 -
    Amortization 2,000.00 2,000.00 2,000.00 -
    Net rent expense 37,000.00 32,000.00 32,000.00 -

    WEST COMPANY (Intermediate Lessor)


    2020 2021 2022 2023
    Net rent expense 65,000 65,000 65,000 -

    Sublease:
    2020 2021 2022 2023
    Rent income - 70,000.00 70,000.00 -
    Amortization - (3,000.00) (3,000.00) -
    Net rent income - 67,000.00 67,000.00 -

    2020 2021 2022 2023


    Net rent expense 3,000 3,000 -

    NORTH COMPANY (Lessee)


    2020 2021 2022 2023
    Net rent expense - 70,000.00 70,000.00 -
    Requirement 3:
    BALANCE SHEET

    East Company (Head Lessor):


    2020 2021
    Asset
    1) Machinery 360,000.00 360,000.00
    Less: Accumulated depreciation (30,000.00) (60,000.00)
    Carrying amount of Machinery 330,000.00 300,000.00
    Add: Deferred initial direct cost 4,000.00 2,000.00
    Adjusted carrying amount of machinery 334,000.00 302,000.00

    Liability
    1) Liability for rent deposit 30,000.00 30,000.00

    West Company (Intermediate Lessor):


    2020 2021
    Asset
    1) Prepaid rent 15,000.00 10,000.00
    2) Rent deposit 30,000.00 30,000.00
    3) Deferred initial direct cost - sublease - 6,000.00

    North Company (Lessee):

    (no entry)

    INCOME STATEMENT

    East Company (Head Lessor):


    2020 2021
    Revenues
    1) Rent income 65,000.00 65,000.00

    Expenses
    1) Insurance 5,000.00 -
    2) Depreciation 30,000.00 30,000.00
    3) Amortization of deferred initial direct cost 2,000.00 2,000.00

    West Company (Intermediate Lessor):


    2020 2021
    Revenues
    1) Rent income - sublease - 70,000.00

    Expenses
    1) Rent expense - original lease 65,000 65,000
    2) Amortization of deferred initial direct cost - 3,000

    North Company (Lessee):


    2020 2021
    Expenses
    1) Rent expense - sublease - 70,000.00
    2022 2023

    360,000.00 360,000.00
    (90,000.00) (120,000.00)
    270,000.00 240,000.00
    - -
    270,000.00 240,000.00

    30,000.00

    2022 2023

    5,000.00 -
    30,000.00 -
    3,000.00 -

    2022 2023

    65,000.00 -

    -
    30,000.00
    2,000.00

    2022 2023

    70,000.00 -

    65,000
    3,000 -
    2022 2023

    70,000.00 -
    WRITE YOUR FINA

    DATE
    2020
    Jan. 1

    2021
    Jan. 1

    2022
    Jan. 1

    2023
    Jan. 1

    2024
    Jan. 1
    WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS B

    ADAM COMPANY
    ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
    2020
    Cash 100,000 Jan. 1 Rent expense
    Rent receivable 40,000
    Rent income 140,000

    Cash

    2021
    Cash 100,000 Jan. 1 Rent expense
    Rent receivable 40,000
    Rent income 140,000

    Cash

    2022
    Cash 140,000 Jan . 1 Rent expense
    Rent income 140,000

    Cash

    2023
    Cash 170,000 Jan . 1 Rent expense
    Rent income 140,000 Rent payable
    Rent receivable 30,000

    Cash

    2024
    Cash 190,000 Jan . 1 Rent expense
    Rent income 140,000 Rent payable
    Rent receivable 50,000

    Cash
    E YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW

    EVE COMPANY
    ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
    2020
    Rent expense 140,000 Jan. 1 Rent expense
    Cash 100,000
    Rent payable 40,000

    150,000
    Rent income 150,000

    2021
    Rent expense 140,000 Jan. 1 Rent expense
    Cash 100,000
    Rent payable 40,000

    150,000
    Rent income 150,000

    2022
    Rent expense 140,000 Jan. 1 Rent expense
    Cash 140,000

    150,000
    Rent income 150,000

    2023
    Rent expense 140,000 Jan. 1 Rent expense
    Rent payable 30,000
    Cash 170,000

    150,000
    Rent income 150,000

    2024
    Rent expense 140,000 Jan. 1 Rent expense
    Rent payable 50,000
    Cash 190,000

    150,000
    Rent income 150,000
    E YOUR FINAL ANSWERS BELOW

    CAIN COMPANY
    ACCOUNT TITLE DEBIT CREDIT

    Rent expense 150,000


    Cash 150,000

    Rent expense 150,000


    Cash 150,000

    Rent expense 150,000


    Cash 150,000

    Rent expense 150,000


    Cash 150,000

    Rent expense 150,000


    Cash 150,000
    Requirement 2:
    ADAM COMPANY
    2020 2021 2022 2023
    Net rent income 140,000 140,000 140,000 140,000

    EVE COMPANY
    2020 2021 2022 2023
    Rent income 150,000 150,000 150,000 150,000
    Less: Rent expense 140,000 140,000 140,000 140,000
    Net rent income 10,000 10,000 10,000 10,000

    CAIN COMPANY
    2020 2021 2022 2023
    Net rent expense 150,000 150,000 150,000 150,000
    Requirement 3:

    2024
    140,000 ADAM COMPANY
    2020
    Asset:
    2024 1) Rent Receivable 40,000
    150,000
    140,000 EVE COMPANY
    10,000 2020
    Liability:
    1) Rent Payable 40,000
    2024
    150,000 CAIN COMPANY

    ADAM COMPANY
    2020
    Revenues
    1) Rent income 140,000

    EVE COMPANY
    2020
    Revenues
    1) Rent income - sublease 150,000

    Expenses
    1) Rent expense - original lease 140,000

    CAIN COMPANY
    2020
    Expenses
    1) Rent expense - sublease 140,000
    BALANCE SHEET

    2021 2022 2023 2024

    80,000 80,000 50,000 0

    2021 2022 2023 2024

    80,000 80,000 50,000 0

    (no entry)

    INCOME STATEMENT

    2021 2022 2023 2024

    140,000 140,000 140,000 140,000

    2021 2022 2023 2024

    150,000 150,000 150,000 150,000

    140,000 140,000 140,000 140,000

    2021 2022 2023 2024

    140,000 140,000 140,000 140,000


    WRITE YOUR FINA

    DATE
    2020
    Jan 1

    Dec 31
    WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS B

    HEAD LESSOR
    ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
    2020
    Equipment - IDC 250,000 Jan 1 Right of use asset
    Cash 250,000

    Lease receivable 7,800,000 1 Lease liability


    Equipment 5,250,000
    Unearned interest income 2,550,000

    Cash 900,000
    Lease receivable 900,000

    Unearned interest income 522,000 Dec 31 Interest expense


    Interest income 522,000

    PV - 1/1/20 5,250,000 31 Depreciation


    Payment - 1/1/20 900,000
    PV - 1/1/20 4,350,000
    x Implicit interest rate 12% 31 Cash
    Interest income 522,000
    E YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW

    INTERMEDIATE LESSOR
    ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
    2020
    Right of use asset 5,007,420 Jan 1
    Lease liability 5,007,420

    Lease liability 900,000


    Cash 900,000

    Interest expense 492,890 Dec 31 Rent expense


    Accrued interest payable 492,890

    Depreciation 625,928
    Accumulated depreciation 625,928

    1,000,000
    Rent income 1,000,000
    E YOUR FINAL ANSWERS BELOW

    LESSEE
    ACCOUNT TITLE DEBIT CREDIT

    no entry

    Rent expense 1,000,000


    Cash 1,000,000

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