ACCT 557 Week 5 Homework & Quiz Intermediate Accounting III

ACCT 557 Week 5 Homework & Quiz Intermediate Accounting III

Week 5

ACCT 557 Week 5 Chapter 22 Homework

ACCT 557 Week 5 Quiz 1

1. Question : (TCO D) Lease methods of accounting are

1. Question :           (TCO D) A major purpose(s) in starting an equipment leasing company is (are)

1. Question :           (TCO D) Pirate, Inc. leased equipment from Shoreline Enterprises under a four-year lease requiring equal annual payments of $425,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pirate, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Pirate, Inc. in the first year of the asset’s life?
2. Question :           (TCO D) On January 2, 2013, Bentley Co. leases equipment from Harry’s Leasing Company with five equal annual payments of $240000 each, payable beginning December 31, 2013. Bentley Co. agrees to guarantee the $20000 residual value of the asset at the end of the lease term. Bentley’s incremental borrowing rate is 10%, however it knows that Harry’s implicit interest rate is 8%. What journal entry would Harry’s Leasing Company make at January 2, 2013 assuming this is a direct–financing lease?
3. Question :           (TCO D) Lease A does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. How should the lessee classify these leases?

1. Question :           (TCO D) Carl Leasing, Inc. agrees to lease medical equipment to Sally, Inc. on January 1, 2012. They agree on the following terms.           

ACCT 557 Week 5 Quiz 2

1. Question : (TCO D) Lease methods of accounting are
2. Question :           (TCO D) Current GAAP requires
3. Question :           (TCO D) Pirate, Inc. leased equipment from Shoreline Enterprises under a four-year lease requiring equal annual payments of $320,000, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Pirate, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Assuming that this lease is properly classified as a capital lease, what is the amount of interest expense recorded by Pirate, Inc. in the first year of the asset’s life?                                      
4. Question :           (TCO D) On January 2, 2013, Bentley Co. leases equipment from Harry’s Leasing Company with five equal annual payments of $240000 each, payable beginning December 31, 2013. Bentley Co. agrees to guarantee the $20000 residual value of the asset at the end of the lease term. Bentley’s incremental borrowing rate is 10%, however it knows that Harry’s implicit interest rate is 8%. What journal entry would Harry’s Leasing Company make at January 2, 2013 assuming this is a direct–financing lease?
5. Question :           (TCO D) Lease A does not contain a bargain purchase option, but the lease term is equal to 90% of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75% of the estimated economic life of the leased property. How should the lessee classify these leases?
6. Question :           (TCO D) Carl Leasing, Inc. agrees to lease medical equipment to Sally, Inc. on January 1, 2012. They agree on the following terms.