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Intermediate Accounting 13th Edition Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield - Solutions

(Pension Worksheet - Missing Amounts) Kramer Co. has prepared the following pension worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for
Pension Worksheet) The following data relate to the operation of Kramer Co.’s pension plan in 2011. The pension worksheet for 2010 is provided in P20-10.Service cost
(Pension Worksheet) Larson Corp. sponsors a defined-benefit pension plan for its employees. On January 1, 2011, the following balances related to this plan. Plan assets (market-related value) ? ? ? ? ? ? ? ? $270,000 Projected benefit obligation ? ? ? ? ? ? ? ? ? ? ? ? ? ? 340,000 Pension
(Postretirement Benefit Worksheet) Hollenbeck Foods Inc. sponsors a postretirement medical and dental benefit plan for its employees. The following balances relate to this plan on January 1, 2010.Plan assets
(Postretirement Benefit Worksheet?2 Years) Elton Co. has the following postretirement benefit plan balances on January 1, 2010. Accumulated postretirement benefit obligation ? ? ? ? ? ? ? ? ? ??$2,250,000 Fair value of plan assets? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
(Pension Terminology and Theory) Many business organizations have been concerned with providing for the retirement of employees since the late 1800s. During recent decades a marked increase in this concern has resulted in the establishment of private pension plans in most large companies and in
(Pension Terminology) The following items appear on Brueggen Company’s financial statements.1. Under the caption Assets:Pension asset/liability2. Under the caption Liabilities:Pension asset/liability3. Under the caption Stockholders’ Equity:Prior service cost as a component of Accumulated Other
(Basic Terminology) In examining the costs of pension plans, Helen Kaufman, CPA, encounters certain terms. The components of pension costs that the terms represent must be dealt with appropriately if generally accepted accounting principles are to be reflected in the financial statements of
(Major Pension Concepts) Davis Corporation is a medium-sized manufacturer of paperboard containers and boxes. The corporation sponsors a noncontributory, defined-benefit pension plan that covers its 250 employees. Sid Cole has recently been hired as president of Davis Corporation. While reviewing
(Implications of GAAP Rules on Pensions) Jill Vogel and Pete Dell have to do a class presentation on GAAP rules for reporting pension information. In developing the class presentation, they decided to provide the class with a series of questions related to pensions and then discuss the answers in
(Gains and Losses, Corridor Amortization) Vickie Plato, accounting clerk in the personnel office of Streisand Corp., has begun to compute pension expense for 2012 but is not sure whether or not she should include the amortization of unrecognized gains/losses. She is currently working with the
(Non-vested Employees—An Ethical Dilemma) Thinken Technology recently merged with College Electronic (CE), a computer graphics manufacturing firm. In performing a comprehensive audit of CE’s accounting system, Gerald Ott, internal audit manager for Thinken Technology, discovered that the new
What are the major lessor groups in the United States? What advantage does a captive have in a leasing arrangement?
Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long-term basis. Without
Identify the two recognized lease-accounting methods for lessees and distinguish between them.
Ballard Company rents a warehouse on a month-to-month basis for the storage of its excess inventory. The company periodically must rent space whenever its production greatly exceeds actual sales. For several years the company officials have discussed building their own storage facility, but this
Distinguish between minimum rental payments and minimum lease payments, and indicate what is included in minimum lease payments.
Explain the distinction between a direct-financing lease and a sales-type lease for a lessor.
Outline the accounting procedures involved in applying the operating method by a lessee.
Outline the accounting procedures involved in applying the capital-lease method by a lessee.
Identify the lease classifications for lessors and the criteria that must be met for each classification.
Outline the accounting procedures involved in applying the direct-financing method.
Outline the accounting procedures involved in applying the operating method by a lessor.
Walker Company is a manufacturer and lessor of computer equipment. What should be the nature of its lease arrangements with lessees if the company wishes to account for its lease transactions as sales-type leases?
Metheny Corporation’s lease arrangements qualify as sales-type leases at the time of entering into the transactions how should the corporation recognize revenues and costs in these situations?
Alice Foyle, M.D. (lessee) has a non-cancelable 20-year lease with Brownback Realty, Inc. (lessor) for the use of a medical building. Taxes, insurance, and maintenance are paid by the lessee in addition to the fixed annual payments, of which the present value is equal to the fair market value of
The residual value is the estimated fair value of the leased property at the end of the lease term.(a) Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee’s accounting for a capitalized-lease transaction?(b) Of what significance is (1) an unguaranteed and
How should changes in the estimated unguaranteed residual value be handled by the lessor?
Describe the effect of a “bargain-purchase option” on accounting for a capital-lease transaction by a lessee.
What are “initial direct costs” and how are they accounted for?
What disclosures should be made by lessees and lessors related to future lease payments?
Where can authoritative iGAAP guidance related to leases be found?
Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for leases.
Both iGAAP and U.S. GAAP require footnote disclosure of operating lease payments. Are there any differences in the information provided to statement readers in these disclosures? Explain.
Briefly discuss the IASB and FASB efforts to converge their accounting guidelines for leases.
What is the nature of a “sale-leaseback” transaction?
Callaway Golf Co. leases telecommunication equipment. Assume the following data for equipment leased from Photon Company. The lease term is 5 years and requires equal rental payments of $31,000 at the beginning of each year. The equipment has a fair value at the inception of the lease of $138,000,
Water world Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments of $43,019 at the beginning of each year. The equipment has a fair value at the inception of the lease of $150,000, an estimated useful life of 4 years, and no salvage value.
Rick Kleckner Corporation recorded a capital lease at $300,000 on January 1, 2011. The interest rate is 12%. Kleckner Corporation made the first lease payment of $53,920 on January 1, 2011. The lease requires eight annual payments. The equipment has a useful life of 8 years with no salvage value.
Use the information for Rick Kleckner Corporation from BE21-3. Assume that at December 31, 2011, Kleckner made an adjusting entry to accrue interest expense of $29,530 on the lease. Prepare Kleckner’s January 1, 2012, journal entry to record the second lease payment of $53,920.
Jana Kingston Corporation enters into a lease on January 1, 2011, that does not transfer ownership or contain a bargain-purchase option. It covers 3 years of the equipment’s 8-year useful life, and the present value of the minimum lease payments is less than 90% of the fair market value of the
Assume that IBM leased equipment that was carried at a cost of $150,000 to Sharon Swander Company. The term of the lease is 6 years beginning January 1, 2011, with equal rental payments of $30,044 at the beginning of each year. All executory costs are paid by Swander directly to third parties. The
Use the information for IBM from BE21-6. Assume the direct-financing lease was recorded at a present value of $150,000. Prepare IBM’s December 31, 2011, entry to record interest.
Jennifer Brent Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage value. On January 1, 2011, Jennifer Brent leases the equipment to Donna Havaci Inc. for one year with one rental payment of $15,000 on January 1. Prepare Jennifer Brent Corporation’s 2011
Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2011, which requires 6 annual payments of $40,000 each, beginning January 1, 2011. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at lease-end. The equipment has a useful life of 6 years.
Use the information for Indiana Jones Corporation from BE21-9. Assume that for Lost Ark Company, the lessor, Collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the machinery is $202,921. Prepare Lost Ark’s January 1, 2011,
Geiberger Corporation manufactures replicators. On January 1, 2011, it leased to Altheas Company a replicator that had cost $110,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $40,800 payable each January 1, beginning
On January 1, 2011, Irwin Animation sold a truck to Peete Finance for $33,000 and immediately leased it back. The truck was carried on Irwin’s books at $28,000. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $8,705 at
Access the glossary (“Master Glossary”) to answer the following.(a) What is a bargain-purchase option?(b) What is the definition of “incremental borrowing rate”?(c) What is the definition of “estimated residual value”?(d) What is an unguaranteed residual value?
What comprises a lessee’s minimum lease payments? What is excluded?
What information should a lessee disclose about its capital leases in its financial statements and footnotes?
How should a less or measure its initial gross investment in either a sales-type lease or a direct-financing lease?
On January 1, 2011, Evans Company entered into a non-cancelable lease for a machine to be used in its manufacturing operations. The lease transfers ownership of the machine to Evans by the end of the lease term. The term of the lease is 8 years. The minimum lease payment made by Evans on January 1,
Sylvan Inc. entered into a non-cancelable lease arrangement with Breton Leasing Corporation for a certain machine. Breton’s primary business is leasing; it is not a manufacturer or dealer. Sylvan will lease the machine for a period of 3 years, which is 50% of the machine’s economic life. Breton
(Lessee Capitalization Criteria) On January 1, Santiago Company, a lessee, entered into three non-cancelable leases for brand-new equipment, Lease L, Lease M, and Lease N. None of the three leases transfers ownership of the equipment to Santiago at the end of the lease term. For each of the three
Comparison of Different Types of Accounting by Lessee and LessorPart 1Capital leases and operating leases are the two classifications of leases described in FASB pronouncements from the standpoint of the lessee.(a) Describe how a capital lease would be accounted for by the lessee both at the
Albertson Corporation is a diversified company with nationwide interests in commercial real estate developments, banking, copper mining, and metal fabrication. The company has offices and operating locations in major cities throughout the United States. Corporate headquarters for Albertson
Baden Corporation entered into a lease agreement for 10 photocopy machines for its corporate headquarters. The lease agreement qualifies as an operating lease in all terms except there is a bargain-purchase option. After the 5-year lease term, the corporation can purchase each copier for $1,000,
On January 1, 2011, Perriman Company sold equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment.The term of the lease is 8 years. There is a gain on the sale portion of the transaction. The lease portion of
On December 31, 2010, Shell hammer Co. sold 6-month old equipment at fair value and leased it back. There was a loss on the sale. Shell hammer pays all insurance, maintenance, and taxes on the equipment. The lease provides for eight equal annual payments, beginning December 31, 2011, with a present
The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, HYPERLINK "www.wiley.com/college/kieso" www.wiley.com/college/kieso. Refer to P&G’s financial statements, accompanying notes, and management’s discussion and analysis
Go to the book’s companion website or the company websites and use information found there to answer the following questions related to UAL, Inc. and Southwest Airlines.(a) What types of leases are used by Southwest and on what assets are these leases primarily used?(b) How long-term are some of
Presented in Illustration 21-31 are the financial statement disclosures from the 2007 annual report of Tasty Baking Company. Answer the following questions related to these disclosures.(a) What is the total obligation under capital leases at December 29, 2007, for Tasty Baking Company?(b) What is
As discussed in the chapter, U.S. GAAP accounting for leases allows companies to use off???balance-sheet financing for the purchase of operating assets. International accounting standards are similar to U.S. GAAP in that under these rules, companies can keep leased assets and obligations off their
Daniel Hardware Co. is considering alternative financing arrangements for equipment used in its warehouses. Besides purchasing the equipment outright, Daniel is also considering a lease. Accounting for the outright purchase is fairly straightforward, but because Daniel has not used equipment leases
Go to the book's companion website, at www.wiley.com/college/kieso, to find interactive problems that simulate the computerized CPA exam. The professional simulations for this chapter ask you to address questions related to the accounting forleases.
On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine. The terms of the lease called for Adams to make annual payments of $9,968 at the beginning of each year, starting January 1, 2011. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed
Brecker Company leases an automobile with a fair value of $10,906 from Emporia Motors, Inc., on the following terms:1. Non-cancelable term of 50 months.2. Rental of $250 per month (at end of each month). (The present value at 1% per month is $9,800.)3. Estimated residual value after 50 months is
Assume that on January 1, 2011, Kimberly-Clark Corp. signs a 10-year non-cancelable lease agreement to lease a storage building from Trevino Storage Company. The following information pertains to this lease agreement.1. The agreement requires equal rental payments of $90,000 beginning on January 1,
Krauss Leasing Company signs a lease agreement on January 1, 2011, to lease electronic equipment to Stewart Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:1. Stewart has the option to
(Type of Lease, Amortization Schedule) Jacobsen Leasing Company leases a new machine that has a cost and fair value of $75,000 to Stadler Corporation on a 3-year non-cancelable contract. Stadler Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and
Lessor Entries, Sales-Type Lease Watkins Company, a machinery dealer, leased a machine to Romero Corporation on January 1, 2011. The lease is for an 8-year period and requires equal annual payments of $38,514 at the beginning of each year. The first payment is received on January 1, 2011. Watkins
On January 1, 2011, Palmer Company leased equipment to Woods Corporation. The following information pertains to this lease.1. The term of the non-cancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.2. Equal rental payments are due
The following facts pertain to a non-cancelable lease agreement between Lennox Leasing Company and Gill Company, a lessee. 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
A lease agreement between Lennox Leasing Company and Gill Company is described in E21-8. (Round all numbers to the nearest cent.)Refer to the data in E21-8 and do the following for the lessor.(a) Compute the amount of the lease receivable at the inception of the lease.(b) Prepare a lease
Fieval Leasing Company signs an agreement on January 1, 2010, to lease equipment to Reid Company. The following information relates to this agreement.1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.2. The cost of the
Grady Leasing Company signs an agreement on January 1, 2010, to lease equipment to Azure Company. The following information relates to this agreement.1. The term of the non-cancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5 years.2. The fair value
On January 1, 2011, Secada Co. leased a building to Ryker Inc. The relevant information related to the lease is as follows.1. The lease arrangement is for 10 years.2. The leased building cost $3,600,000 and was purchased for cash on January 1, 2011.3. The building is depreciated on a straight-line
On January 1, 2011, a machine was purchased for $900,000 by Floyd Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Crampton Inc. on January 1, 2011, at an annual rental of $180,000. Other relevant
On February 20, 2011, Hooke Inc., purchased a machine for $1,200,000 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to Sage Company on March 1, 2011, for a 4-year period at
Assume that on January 1, 2011, Elmer’s Restaurants sells a computer system to Liquidity Finance Co. for $510,000 and immediately leases the computer system back. The relevant information is as follows.1. The computer was carried on Elmer’s books at a value of $450,000.2. The term of the
Presented below are four independent situations.(a) On December 31, 2011, Beard Inc. sold computer equipment to Barber Co. and immediately leased it back for 10 years. The sales price of the equipment was $560,000, its carrying amount is $400,000, and its estimated remaining economic life is 12
Glaus Leasing Company agrees to lease machinery to Jensen Corporation on January 1, 2010. The following information relates to the lease agreement.1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.2. The cost of the machinery is
Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year non-cancelable contract starting January 1, 2011. Terms of the lease require payments of $33,000 each January 1, starting January 1, 2011. Cleveland will pay insurance, taxes, and maintenance charges on the crane, which has
Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications. Upon completion of the engines, Winston has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The
(Balance Sheet and Income Statement Disclosure?Lessee) The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system. Inception date ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? October 1,
Assume the same information as in P21-4.(Round all numbers to the nearest cent.)(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
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. The lessee assumes responsibility for all executory costs, which are expected to amount to $5,000 per year. The asset will revert to the lessor at the end of the lease term.
Ludwick Steel Company as lessee signed a lease agreement for equipment for 5 years, beginning December 31, 2010. Annual rental payments of $40,000 are to be made at the beginning of each lease year (December 31). The taxes, insurance, and the maintenance costs are the obligation of the lessee. The
On January 1, 2011, Cage Company contracts to lease equipment for 5 years, agreeing to make a payment of $137,899 (including the executory costs of $6,000) at the beginning of each year, starting January 1, 2011. The taxes, the insurance, and the maintenance, estimated at $6,000 a year, are the
Shapiro Inc. was incorporated in 2010 to operate as a computer software service firm with an accounting fiscal year ending August 31. Shapiro's primary product is a sophisticated online inventory-control system; its customers pay a fixed fee plus a usage charge for using the system. Shapiro has
George Company manufactures a computer with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $278,072, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000.
Assume the same data as in P21-10 with National Airlines Co. having an incremental borrowing rate of 10%.(Round all numbers to the nearest dollar.)(a) Discuss the nature of this lease in relation to the lessee, and compute the amount of the initial obligation under capital leases.(b) Prepare a
(Basic Lessee Accounting with Difficult PV Calculation) In 2009 Gris hell Trucking Company negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company's specifications on land owned by the company.
Amir ante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $411,324, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be
Assume the same data as in P21-13 and that Chambers Medical Center has an incremental borrowing rate of 10%.(Round all numbers to the nearest dollar.)(a) Discuss the nature of this lease in relation to the lessee, and compute the amount of the initial obligation under capital leases.(b) Prepare a
You are auditing the December 31, 2011, financial statements of Hackney, Inc., manufacturer of novelties and party favors. During your inspection of the company garage, you discovered that a 2010 Shirk automobile not listed in the equipment subsidiary ledger is parked in the company garage. You
Goring Dairy leases its milking equipment from King Finance Company under the following lease terms.1. The lease term is 10 years, non-cancelable, and requires equal rental payments of $30,300 due at the beginning of each year starting January 1, 2011.2. The equipment has a fair value and cost at
What is the purpose of the statement of cash flows? What information does it provide?
Of what use is the statement of cash flows?

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