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INTERMEDIATE ACCOUNTING 2 FINALS SOLVINGS
CH 11-
On January 1, 2020, Northstar Company entered into an 8-year lease of a floor of building with useful life of 15 years with the following terms: Annual rental for the first three years payable at the end of each year 300, Annual rental for the next five years payable at the end of each year 400, Implicit interest rate 10% PV of an ordinary annuity of 1 at 10% for three periods 2. PV of an ordinary annuity of 1 at 10% for five periods 3. The lease provides for neither a transfer of title to the lessee nor a purchase option. What is the lease liability on January 1, 2020? 1, 516, 000 2, 263, 000 1,884, 1, 697, 250 What is the interest expense for 2020? 188, 400 226, 300 151, 600 169, What is the interest expense for 2023? 151, 460 126, 606 164, 964 200, 000 What is the lease liability on December 31, 2023? 1, 614, 604 1, 266, 064 1,366, 064 1, 214, 604
Conn Company owns an office building and normally charges tenants P3,000 per square meter per year for office space. Because the occupancy rate is low, Conn Company agreed to lease 1,000 square meters to Hanson Company at P1,200 per square meter for the first year of a three-year operating lease. Rent for remaining years will be at the P3,000 rate. Hanson Company moved into the building on January 1, 2020, and paid the first year’s rent in advance. What amount of rental revenue should be reported in the income statement for the year ended September 30, 2020? 2, 400, 1,200, 1,800, 900, CH 12- 11 Wall Company leased an office to Fox Company for a five-year term beginning January 1, 2020. Under the terms of the operating lease, rent for the first year is P800,000 and the rent for years 2 through 5 is P1,250,000 per annum. However, as an inducement to enter the lease, Wall Company granted Fox Company the first six months of the lease rent-free. What amount should be reported as rental income for 2020? 1,200, 1,160, 1,080,
At the beginning of current year, Wren Company leased a building to Brill Company under an operating lease for ten years at P500,000 per year, payable the first day of each lease year. Wren Company paid P150,000 to a real estate broker as initial direct cost. The building is depreciated P120,000 per year. Wren Company incurred insurance and property tax expense totaling P90,000 for the current year. What is the net rent income for the current year? 275, 290, 350, 365, CH 12- At the beginning of current year, Rapp Company leased a new machine to Lake Company for 5 years. The annual rent is P900,000. Additionally, Lake Company paid P500,000 to Rapp Company as a lease bonus and P250,000 as a security deposit to be refunded upon expiration of the lease. What amount should be reported as rent revenue for the current year? 1, 400, 1, 250, 1,000,
At the beginning of current year, Lessor Company leased a machine to Lessee Company. The machine had an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual lease payments of P1,730,541 are made each December 31. The machine reverts to Lessor at the end of the lease term, at which time the residual value of the machine will be P400,000. The residual value is unguaranteed. The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15% for 5 periods is 3.3522. At the commencement date of the lease, what would be the net lease receivable on the part of the lessor? 6,400, 5,801, 6,000, 5,600, What is the gross investment in the lease? 8,652, 9,052, 6,000, 8,252, What is the total unearned interest income? 3,052, 2,652, 2,252, 6,000, What is the interest income for the current year? 1,297, 1,357, 900,
Glade Company leases computer equipment under a direct financing lease. The equipment has no residual value at the end of the lease and the lease does not contain purchase option. The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of P3,234,000. The present value of an annuity due to 1 at 8% for 5 years is 4.312. What total amount of interest revenue should be recognized over the lease term? 1,293, 1,394, 516, 750, CH 13- At the beginning of current year, Nueva Company, as lessor, leased an equipment for ten years at an annual rental of P1,200,000, payable by Caster Company, the lessee, at the beginning of each year. The lease is appropriately accounted for as finance lease. The equipment had a cost of P8,400,000 with an estimated life of 12 years and no residual value. The straight line depreciation is used. The implicit rate is 9%. What amount of interest income should be reported in the income statement for the current year? 500, 648, 756,
Cassandra Company is in the leasing business. The entity acquired a specialized packaging machine for P3,000,000 cash and leased it for a period of six years, after which the machine is to be returned to Cassandra Company for disposition. The guaranteed residual value of the machine is P200,000. The lease term was arranged so that a return of 12% is earned by Cassandra Company. The PV of 1 at 12% for six periods is 0.51 and the present value of an annuity of 1 in advance at 12% for six periods is 4.60. What is the annual lease payment payable in advance required to yield the desired return? 630, 652, 608, 732, CH 13- Magnum Company had an asset costing P5,239,000. The asset was leased at the beginning of the current year to another entity. Five annual lease payments are due in advance at the beginning of each lease year. The lessee guaranteed the P2,000,000 residual value of the asset at the end of the 5-year lease term. The lessor’s implicit interest rate is 8%. The PV of 1 at 8% for 5 periods is 0.68, and the PV of an annuity of 1 in advance at 8% for 5 periods is 4.31. What is the annual lease payment? 1,215, 1,531, 900,
At the beginning of current year, Howe Company leased equipment to Kew Company for an eight-year period. Equal payments under the lease are P500,000 and are due at the beginning of the year. The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000. The lease is appropriately accounted for as a sales type lease. The present value of the lease payments at an implicit interest rate is 12% is P2,780,000. What amount of profit on the sale should be reported for the current year? 900, 780, 240, 333, CH 14- Gold Company leased equipment to Fair Company and properly recorded the sales type lease. The eight annual payments of P300,000 are due at the beginning of each year. The lessor had purchased the equipment for P1,100,000 and had a list price of P1,800,000. The present value of the lease payments is P1,700,000. The imputed interest rate on the lease was 11% and the lessee had an incremental borrowing rate of 10%. What profit on sale should be reported in the current year? 380, 600, 220, 0 What amount of interest income should be reported the current year? 165, 140, 187,
On July 1, 2020, Meg Company leased equipment to Wee Company for an 8-year period. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2020. The interest rate contemplated by Meg company and Wee Company is 10%. The cash selling price of the equipment is P3,520,000 and the cost of the equipment on Meg Company’s accounting records is P2,800,000. The lease is appropriately recorded as a sales type lease. What amount of profit on sale should be recognized for the year ended December 31, 2020? 600, 720, 360, 300, What amount of interest revenue should be recorded for the year ended December 31, 2020? 292, 146, 352,
Reagan Company used leases as a method of selling products. In 2020, Reagan Company completed construction of a passenger ferry. On January 1, 2020, the ferry was leased to the Super Ferry Line on a contract specifying that ownership of the ferry will transfer to the lessee at the end of the lease period. Original cost of the ferry 8,000, Fair value of ferry at lease date 13,000, Lease payments in advance 1,500, Residual value 2,000, Implicit interest rate 12% Date of first lease payment January 1, 2020 Lease term 20 years PV of an annuity due of 1 at 10% for 20 periods 8. PV of 1 at 12% for 20 periods 0. What is the gross investment in the lease? 30,000, 32,000, 10,000, 38,000, What is the net investment in the lease? 12,555, 13,000, 12.755, 8,000, What is the gross profit on sale for 2020? 6,555, 4,555, 5,000, 7,000, What is the interest income for 2020? 1,506, 1,560, 1,326, 1,380,
On December 31, 2020, Bain Company sold a machine to Ryan Company and simultaneously leased it back for one year. The entity provided the following information at this date: Sales price 360, Carrying amount 330, Present value of reasonable lease rentals (P30,000 for 12 months @ 12%) 341, Estimated remaining useful life 12 years In the income statement for 20202, what amount should be reported as gain from the sale of the machine? 34, 30, 4, 0 CH 15- On December 31, 2020, Lane Company sold equipment to Noll Company and simultaneously leased it back for 3 years. The leaseback is appropriately considered a low value lease. Sale price 480, Carrying amount 360, Estimated remaining economic life 5 years What amount should be reported as a gain from sale of equipment for 2020? 120, 60, 40, 0
At beginning of the current year, Arianne Company sold a machine and immediately leased it back. Sales price at fair value 5,000, Carrying amount of the machine 6,000, Annual rental payable at the end of each year 500, Remaining life of the machine 20 years Lease term 5 years Implicit interest rate 6% PV of ordinary annuity of 1 at 6% for 5 periods 4. What is the cost of right of use of asset? 2,105, 2,526, 2,895, 1,500, What is the loss on right transferred to the buyer-lessor? 579, 505, 500, 0 What is the lease liability at year-end? 2,177, 1,605, 1,731, 2,105, What is the net annual rental income of the buyer-lessor? 373, 200, 500,
Jessabel Company has established a defined benefit pension plan for an employee. Annual payments under the pension plan are equal to the employee’s highest lifetime salary multiplied by 3% multiplied by numbers of years with the entity. On December 31, 2020, the employee had worked for Jessabel Company for 15 years. The current salary is P500,000. The employee is expected to retire in 5 years and the salary increases are expected to average 4% per year during that period. The employee is expected to live for 6 years after retiring and will receive the first annual pension payment one year after retirement. The discount rate is 12%. Future value of 1 at 4% for 5 periods 1. PV of an ordinary annuity of 1 at 12% for 6 periods 4. PV of 1 at 12% for 5 periods 0. What is the projected benefit obligation on December 31,2020? 638, 225, 524, 608, CH 17- A director of Ester Company shall receive a retirement benefit of 20% of final salary per annum for a contractual period of three years. The anticipated salary is P1,000,000 for 20202, P1,200,000 for 2021 and P1,500,000 for 2022. The discount rate is 10%. The PV of 1at 10% is .909 for one period and .826 for two periods. Under the projected unit credit method, what is the estimated pension liability on December 31, 2021? 900, 520, 600,
Bronson Company received the following report from the independent actuary in relation to a defined benefit pension plan at year-end: Pension benefits paid 135, PBO at year-end 2,160, Interest expense on PBO 120, Discount rate 8% What is the current service cost for the current year? 675, 810, 540, 255, CH 18- Winter Company provided the following defined benefit plan information for the current year: January 1 Projected benefit obligation 3,500, Accumulated benefit obligation 2,600, During the year Pension benefits paid 250, Actuarial loss 200, Past service cost 500, December 31 Projected benefit obligation 4,700, Accumulated benefit obligation 3,600, Discount rate 10% There is no change in actuarial assumptions during the current year. What is the current service cost for the current year? 400, 800, 200,
Gail Company provided followinginformation pertaining to defined benefit plan for the current year: Fair value of plan assets, beginning of year 3,500, Fair value of plan assets, end of year 5,250, Employer contributions 1,100, Benefits paid 850, What was the actual return on plan assets? 1,500, 2,600, 1,750, 650, CH 18- Manaoag Company maintains a fund to cover a pension plan with the following data for the current year: January 1 Fair value of plan assets 8,750, Market-related value of pension fund (5-year weighted average) 7,150, During the year Pension benefits paid 600, Contribution to the fund 700, Actual return on plan assets 950, What is the fair value of plan assets on December 31? 8,200, 9,800, 7,250, 8,850,
