AC 302 Chapter 21 Problem Question 5

AC 302 Chapter 21 Problem Question 5
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
P21-5 (Balance Sheet and Income Statement Disclosure—Lessor) 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, 2010. (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 Liability / Receivable:	Reduction of Lease Liability / Receivable:	Balance of Lease Liability / Receivable:	
	10/01/12				300,383.00 	
	10/01/12	62,700.00 		62,700.00 	237,683.00 	
	10/01/13	62,700.00 	23,768.30 	38,931.70 	198,751.30 	
	10/01/14	62,700.00 	19,875.13 	42,824.87 	155,926.43 	
	10/01/15	62,700.00 	15,592.64 	47,107.36 	108,819.07 	
	10/01/16	62,700.00 	10,881.91 	51,818.09 	57,000.98 	
	10/01/17	62,700.00 	5,699.02 	57,000.98 	0.00 	
		376,200.00 	75,817.00 	300,383.00 		
						
Instructions: (Round to whole dollars.)						
"(a) Assuming the lessor'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 lessor's income statement for the year ending
     September 30, 2013?"						
						
						
	Account Title			Amount		
						
(2) What items and amounts will appear on the lessor's balance sheet at September 30, 2013?						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
"(3) What items and amounts will appear on the lessor's income statement for the year
     ending September 30, 2014?"						
						
	Account Title				Amount	
						
(4) What items and amounts will appear on the lessor's balance sheet at September 30, 2014?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	
						
	Title					
	Account Title				Amount	
						
"(b) Assuming the lessor'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 lessor's income statement for the year ending
     December 31, 2012?"						
						
	Account Title			0	Amount	
						
(2) What items and amounts will appear on the lessor's balance sheet at December 31, 2012?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	Formula
						
	Title					
	Account Title				Amount	
						
"(3) What items and amounts will appear on the lessor's income statement for the year ending
     December 31, 2013?"						
						
	Account Title				Amount	
						
(4) What items and amounts will appear on the lessor's balance sheet at December 31, 2013?						
						
	Title					
	Account Title				Amount	
	Account Title				Amount	Formula
						
	Title					
	Account Title				Amount