Accounting homework

Question1

Flop Co. leased office premises to Flim, Inc. for a five-year term beginning January 2, year 1. Under the terms of the operating lease, rent for the first year is $8,000 and rent for years two through five is $12,500 per annum. m. However, as an inducement to enter the lease, Flop granted Flim the first six months of the lease rent-free. In its December 31, year 1 income statement, what amount should Flop report as rental income

A.$8,000

B. $12,000

C. $10,800

D. $11,600

Question 2

On July 1, year 1, Flop, Inc. leased a delivery truck from Floozy Corp. under a three-year operating lease. Total rent for the term of the lease will be $36,000, payable as follows:

12 months at $ 500 = $ 6,000

12 months at $ 750 = 9,000

12 months at $1,750 = 21,000

All payments were made when due. In Floozy's June 30, year 3 balance sheet, the accrued rent receivable should be reported as

A.$21,000

B.$12,000

C. $0

D.$9,000

Question 3

As an inducement to enter a lease, Flapper, Inc., a lessor, grants Floozy Corp., a lessee, nine months of free rent under a five-year operating lease. The lease is effective on July 1, year 1 and provides for monthly rental of $1,000 to begin April 1, year 2. In Floozy's income tatement for the year ended June 30, year 2, rent expense should be reported as?

a.$ 3,000

b.$10,200

c.$ 2,550

d. $ 9,000

Question 4

On January 1, year 1, Floozy Co. signed a seven-year lease for equipment having a ten-year economic life. The present value of the monthly lease payments equaled 80% of the equipment's fair value. The lease agreement provides for neither a transfer of title to Floozy nor a bargain purchase option. In its year 1 income statement Floozy should report?

a. Lease amortization equal to one-tenth of the equipment's fair value.

b. Rent expense equal to the year 1 lease payments less interest expense.

c. Lease amortization equal to one-seventh of 80% of the equipment's fair value.

d. Rent expense equal to the year 1 lease payments

Question 5

Flipper Co. leases a building for its product showroom. The ten-year nonrenewable lease will expire on December 31, year 11. In January year 6, Flipper redecorated its showroom and made leasehold improvements of $48,000. The estimated useful life of the improvements is eight years. Flipper uses the straight-line method of amortization. What amount of leasehold improvements, net of amortization, should Flipper report in its June 30, year 6 balance sheet?

a. $45,000

b. $43,200

c. $44,000

d. $45,600

Question 6

On January 2, year 1, Flipper Co. leased land and building from an unrelated lessor for a ten-year term. The lease has a renewal option for an additional ten years, but Flipper has not reached a decision with regard to the renewal option. In early January of year 1, Flipper completed the following improvements to the property:

Description Estimated life Cost

Sales office 10 years $47,000

Warehouse 25 years 75,000

Parking lot 15 years 18,000

Amortization of leasehold improvements for year 1 should be

a. $ 7,000

b. $ 12,200

c. $14,000

d. $ 8,90

Question 7

Flipper Co. leases computer equipment to customers under direct-financing leases. The equipment has no residual value at the end of the lease and the leases do not contain bargain purchase options. Flipper wishes to earn 8% interest on a five-year lease of equipment with a fair value of $323,400. The present value of an annuity due of $1 at 8% for five years is 4.312. What is the total amount of interest revenue that Flipper will earn over the life of the lease?

a. $ 75,000

b. $139,450

c. $ 51,600

d. $ 129,360

Question 8

Floppy Co. leased equipment to Flipper Corp. on January 2, year 1, for an eight-year period expiring December 31, year 8. Equal payments under the lease are $600,000 and are due on January 2 of each year. The first payment was made on January 2 year 1. The list selling price of the equipment is $3,520,000 and its carrying cost on Floppy's books is $2,800,000. The lease is appropriately accounted for as a sales-type lease. The present value of the lease payments is $3,300,000. What amount of profit on the sale should Floppy report for the year ended December 31, year 1

a. $720,000

b. $500,000

c. $0

d. $90,000

Question 9

The excess of the fair value of leased property at the inception of the lease over its cost or carrying amount should be classified by the lessor as

a. Unearned income from a sales-type lease.

b. Unearned income from a direct-financing lease.

c. Manufacturer's or dealer's profit from a direct-financing lease.

d. Manufacturer's or dealer's profit from a sales-type lease.

Question 10

Lease M 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 P does not transfer ownership of the property to the lessee at 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?

a. Lease M Lease P

Operating Lease Operating Lease

b. Lease M Lease P

Operating Lease Capital lease

c. Lease M Lease P

Capital lease Capital lease

d. Lease M Lease P

Capital lease Operating Lease