AC 302 Chapter 21 Problem question 4

AC 302 Chapter 21 Problem question 4
Name				Date		
Instructor				Course		
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
P21-4 (Balance Sheet and Income Statement Disclosure—Lessee) The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.						
						
						
						
	Inception date:					October 1, 2012
	Lease term:					6 years
	Economic life of lease equipment:					6 years
	Fair value of asset at October 1, 2012:					$300,383 
	Residual value at end of lease term:					0
	Lessor's implicit rate:					10%
	Lessee's incremental borrowing rate:					10%
	"Annual lease payment due at the beginning of each year,
       beginning with October 1, 2012:"					$62,700 
						
						
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 				$5,500 	per year, and are paid each 	
October 1, beginning October 1, 2012. (This $5,500 is not included in the rental payment of $62,700.) 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 as a capital lease by the lessee and as a direct-finance lease by the lessor.						
						
						
						
	Date:	Annual lease Payment / Receipt:	Interest (10%) on Unpaid Liabililty / Receivable:	Reduction of Lease Liability / Receivable:	Balance of Lease Liability / Receivable:	
	10/01/12				300,383 	
	10/01/12	62,700 		62,700 	237,683 	
	10/01/13	62,700 	23,768 	38,932 	198,751 	
	10/01/14	62,700 	19,875 	42,825 	155,926 	
	10/01/15	62,700 	15,593 	47,107 	108,819 	
	10/01/16	62,700 	10,882 	51,818 	57,001 	
	10/01/17	62,700 	5,699*	57,001 	0 	
		376,200 	70,118 	300,383 		
	*Rounding error is $1.					
						
Instructions: (Round to whole dollars.)						
"(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, 2013?"						
						
						
	Account Title				Amount	
	Account Title				Amount	
	Account Title				Amount	
						
(2) What items and amounts will appear on the lessee's balance sheet at September 30, 2013?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
"(3) What items and amounts will appear on the lessee's income statement for the year ending
     September 30, 2014?"						
						
						
	Account Title				Amount	
	Account Title				Amount	
	Account Title				Amount	
						
(4) What items and amounts will appear on the lessee's balance sheet at September 30, 2014?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
"(b) Assuming the lessee's accounting period ends on December 31, 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
      December 31, 2012?"						
						
						
	Account Title				Amount	
	Account Title				Amount	
	Account Title				Amount	
						
						
(2) What items and amounts will appear on the lessee's balance sheet at December 31, 2012?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
"(3) What items and amounts will appear on the lessee's income statement for the year ending
     December 31, 2013?"						
						
						
	Account Title					Amount
	Account Title					Amount
	Account Title					Amount
						
(4) What items and amounts will appear on the lessee's balance sheet at December 31, 2013?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount