On February 20, 2014, Sigouin Inc. purchased a machine for $1.6 million for the purpose of leasing

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On February 20, 2014, Sigouin Inc. purchased a machine for $1.6 million for the purpose of leasing it. The machine is expected to have a 10-year life with no residual value, and will be depreciated on the straight-line basis. The machine was leased to Densmore Corporation on March 1, 2014, for a four-year period at a monthly rental of $26,500. There is no provision for the renewal of the lease or purchase of the machine by the lessee at the expiration of the lease term. Sigouin paid $36,000 to a third party for commissions associated with negotiating the lease in February 2014. Both Sigouin Inc. and Densmore Corporation use ASPE.
Instructions
(a) What expense should Densmore Corporation record based on the above facts for the year ended December 31, 2014? Show supporting calculations in good form.
(b) What income or loss before income tax should Sigouin record based on the above facts for the year ended December 31, 2014?
(c) Would your answer to parts (a) and (b) above be different if both companies used IFRS?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-1118300855

10th Canadian Edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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