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intermediate accounting
Intermediate Accounting 2nd edition Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella - Solutions
Max Ferguson Cosmetics compensates its key employees by offering stock options as part of total compensation. On January 1 of the current year, Max Ferguson granted 10,000 options to acquire 10,000 shares of its $2 par value common stock at an exercise price of $18 per share. The market price on
eGear Company started a share appreciation plan on January 1, 2018, when it granted 200,000 rights to its executives. The vesting period is 2 years. The plan expires on January 1, 2020. The fair value of eGear's SARs for the years ended December 31, 2018 and 2019. are as follows:Date
Davidson Company compensates its key employees by offering stock options as pan of total compensation. On January 1 of the current year, Davidson granted 80,000 options to acquire 80,000 shares of its $1 par value common stock m an exercise price of $37 per share. The market price on the date of
Max Ferguson Cosmetics compensates its key employees by offering stock options as part of total compensation. On January 1 of the current year, Max Ferguson granted 10,000 options to acquire 10,000 shares of its $2 par value common stock at an exercise price of $18 per share. The market price on
The following information is from the books of OZP Farms, Inc. regarding its employee stock options. The firm granted options on January 2, 2018, that permit employees to acquire 100,000 shares of $1.20 par value common stock at an exercise price of $4.80 per share. The market p,ice of the
Togo Incorporation started a share appreciation plan on January 1, 2018, when it granted 50,000 rights to its executives. The vesting period is 2 years. The stock appreciation rights are settled for cash. The plan expires on January 1, 2020. The fair value of Togo's SARs for the years ended
The lease rules discussed in this chapter have an effective date for fiscal years beginning after December 15, 2018. Under U.S. GAAP, the accounting treatment of operating leases for the lessee were quite different than these new rules. Under the old rules, lessees did not include an asset or a
Crabtree Products. Inc. leases machinery to Beane Poll Enterprises. The machinery is not specialized. The lease is for 3 years requiring payments of $22,500 at the beginning of each lease year (April 1). The equipment has a fair value of $ 82,833 and is carried in Crabtree's inventory at $ 72,833.
Walker Power Washing Services. Inc. leases nonspecialized equipment from McCoy Equipment. The lease term is 3 years with no renewal or purchase options. and little to the underlying asset is retained by the lessor at the end of the lease term. The lease requires annual fixed rental payments of
Use the information from P18-9 to complete the following requirements.Data from P18-9Lori-Ann Fashions, Inc., entered into a 5-year lease with Krishnan Rentals to use equipment. The economic life of the equipment is 30 years. The equipment had a fair value of $8,500,000. Lori-Ann has an option to
Lori-Ann Fashions, Inc., entered into a 5-year lease with Krishnan Rentals to use equipment. The economic life of the equipment is 30 years. The equipment had a fair value of $8,500,000. Lori-Ann has an option to purchase the equipment at the end of the lease term, for $5,500,000, which is likely
Barisi Equipment Company leases nonspecialized cutting machinery to Bastone. Inc. over a 4 -year term. The lease commencement date is January 1, 2019. The first payment is due on January 1, 2019. The remaining payments are due on December 31, 2019, December 31, 2020, and December 31, 2021. The
On May 1, 2018, Gia Equipment Manufacturers (GEM) agreed to lease nonspecialized machinery to Jason Associates. GEM paid $2,000,000 to produce the machine and carries it at this amount in its inventory. The fair value (current selling price) of the machine is $2,104,317. The lease terms follow.•
On January 1, 2018, Moorecraft Finance Company agreed to lease a piece of machinery to Ward Construction Products, Inc. Moorecraft paid $1,554,516 to acquire the machine from the manufacturer and carries it at this amount in its financial statements. The fair value (current selling price) of the
Using the same information as found in P18-4, assume that the lease contains a guaranteed residual value of $15.000. The lessee guarantees the residual value.Data from P18-4On January 1, 2018. JLOU Company leases a fleet of stock delivery vehicles from Dolt Motors, Inc. Under the terms of the
On January 1, 2018. JLOU Company leases a fleet of stock delivery vehicles from Dolt Motors, Inc. Under the terms of the lease, JLOU must pay $65,000 on January 1 of each year, beginning on January 1, 2018, over a 4-year term. The delivery vehicles have a useful life of 4 years. JLOU depreciates
Florida Energy Restoration, Ltd. (FER) enters into a lease agreement on January 1, 2018, to lease standard power generators from R&R Electric, Inc. The terms of the lease follow.• The term of the lease is 7 years with no renewal option. The seven annual lease payments of $300,000 will be made
On January 1, 2018, the lease commencement dare, Curran Manufacturing Corporation (CMC) agreed t o lease a piece of nonspecialized, heavy equipment to Oates Products, Inc. CMC paid $900,000 to manufacture the machine and carries it at this amount in its inventory. The fair value (current selling
Plash Photo Company leased a digital reproduction machine on January 1, 2019. The following information was obtained from the lease contract;• The lease carries a term of 5 years. There is no renewal option and there is no transfer of ownership.• The rental payments of $120,000 per year are due
Using the information provided in E18-20. assume now that Beachmont provides a guarantee of the residual value of $7,000 that will cover any unrecovered fair value by the lessor.Data from E18-20.Beachmont Restaurants, Inc. enters into a lease for standard stoves and grills. The lease term is 3
Beachmont Restaurants, Inc. enters into a lease for standard stoves and grills. The lease term is 3 years with no renewal or purchase options. There is no residual value guarantee. and the lease term,s do not provide for a transfer of title. The economic life of the asset is 10 years. According to
Cardillo Capital enters into a lease agreement with Vincent Motors to lease a delivery van with a fair value of $55,000 under a 36-month (3-year) lease. The van has an estimated useful life of 8 years. No initial direct costs are incurred by the lessor. Cardillo has an option to purchase the van at
True Image Copier Company leases a multi function copier to Fabach incorporated. The lease terms is 4 years with no renewal options; the economic life of the copier is 7 years. The fair value of the copier is $14,000, and True Image Company's equipment carrying value is also $14,000. The residual
Mr. Kay Food Man Incorporated lessee. enters into a lease agreement on July 1, 2018, to lease nonspecialized mobile refrigeration equipment from Pollet Products. The cost of the equipment to Pollet is $180,000. The following information is relevant to the lease agreement.• The term of the lease
Using the information provided in E18-15, assume now that Stewart Standard and Kane Kite are IFRS reporters.Data from E18-15On January 1, 2019, Kane Kite Company leased a nonspecialized fabric-culling machine from Stewart Standard, Inc. Under the terms of the lease, Kane Kite must pay $200,000 on
On January 1, 2019, Kane Kite Company leased a nonspecialized fabric-culling machine from Stewart Standard, Inc. Under the terms of the lease, Kane Kite must pay $200,000 on January 1 of each year, starting in 2019, over a 9-year term. The lease terms do not contain a transfer of ownership. and
Carrie-Ann Fashions, Inc, entered into a 5-year lease with Reese Rentals to occupy an office building. The economic life of the building is 30 years. The building had a fair value of $8,500,000 and Carrie-Ann has an option to purchase the building at the end of the lease term for $5,500,000. which
Seal Container Corporation (SCC) signed a lease agreement on January 1, 2018. to lease new forklift equipment. The terms of the lease follow.• The lease has a terms of 10 years. There are no purchase or renewal options.• SCC makes the annual lease payments of$70,000 on January 1 of each year,
Vanity Jewelers Incorporated signed a lease agreement on July 1, 2020, to lease diamond-polishing equipment from Whitehead Industries. The following information is relevant to the lease agreement.The term of the lease is 7 years with no renewal option. Payments of $45,500 are due on July 1 of each
On January 1, 2018, Lima Leasing Company (LLC) acquired a n airplane to be leased to LA Sky Company. LLC paid $950,000 to acquire the plane, which is also its fair value. The lease terms follow.• Annual rental payments of $190,000 are due January 1 of each year, beginning on January 1, 2018.
On January 1, 2018. Temple Leasing Company (TLC) acquired a fleet of stock vehicles to be leased to Delaware River Company. TLC paid $275,000 to acquire the vehicles, which is also the fair value of the fleet. The lease terms follow.• Annual rental payments of $57,900 are due on January 1 of each
Assume that Bergamini Builders leases medical equipment from Saint Martin's Machine Company. The lease term is for 7 years, and Bergamini must pay seven annual rentals of $40,000 beginning on January 1, 2019, of the current year and every January 1 afterward. The implicit rate in the lease is 3.5%.
Using the same information presented in E18-7. complete the following requirements:E18-7.On January 1. Gump Sales Company entered into an agreement to lease a piece of machinery for a period of 5 years from Smokey Boy Equipment (SBE). The machine is not specialized for Gump's business needs, has a
On January 1. Gump Sales Company entered into an agreement to lease a piece of machinery for a period of 5 years from Smokey Boy Equipment (SBE). The machine is not specialized for Gump's business needs, has a sales price of $70,000. and its useful life is 7 years with no guaranteed residual value.
Fontana Company enters into a lease agreement on January 1, 2017, for nonspecialized equipment leased by Mind bender Insurance Company. The following data are relevant to the lease agreement:• The term of the lease is 4 years with no renewal or purchase options. Annual lease payments of $148,000
On January 1, 2019, Holt National Bank (HNB) acquired a fleet of trucks to be leased to J Rivers Company. HNB paid $105,000 to acquire the vehicles. which is also the fair value of the fleet. The lease terms follow.• Annual rental payments of $36.272 are due on January 1 of each year.• Lease
Caye Comfon, me. manufactures a complete line of beds. cots, and Futons. Caye Comfon leases a spring fabricating machine from Stein Spring Company for 3 years with no renewal or purchase options. The equipment has a fair value of $10,000 and title will be retained by the lessor at the end of the
BabyClothing (BC) Enterprises leases digital imaging equipment from Sally Systems Leasing. The lease term is for 3 years and the economic life of the equipment is 5 years. The lease contract does not contain a purchase option and title will not be transferred m the end of the lease term. The fair
Using the same facts as included in E18-1. now assume that the variable payments cannot be less than $2,000 per year.Data from E18-1SouthSide Services leases several computer servers from Sharpe Computing Company. The lease agreement includes consulting and training updates. The standalone prices
SouthSide Services leases several computer servers from Sharpe Computing Company. The lease agreement includes consulting and training updates. The standalone prices charged by Sharpe for each separate component are $850,000 for the servers and $150,000 for the consulting and training. The lease is
Aviata Products, lnc., leases a high-capacity printer from Dewey Office Services for $4.200. The original cost of the primer was $4.900. Under the terms of the agreement. Aviata will make even payments over the 42-month rental period. What is the journal entry made each month if Aviata elects lo
Morris Products, Inc. leases several copy machines from Stanley Office Services. Under the terms of the agreement. Morris will pay rentals of$ 800 per month for an 11 month period. Morris elects to apply the exemption for short-term leases. That is, Morris makes a policy election not to record the
Assume that you are given the following information for a 5-year lease (with payments due on January 1 of each year):The lease payments are $60,000 per year.The fair value of the underlying asset is $500,000.The deferred initial indirect costs of the lessor are equal to $25,000.The lessor's
Assume that Anderson Associates, Inc., leases conference and training facilities from The Learning Company. Anderson will conduct training seminars for the claims at the leased space. The lease requires annual payments of $400,000 plus a percentage of sales volume that cannot be less than 1% of
Assume that Sting Stores leases office space from Ramona Really for $15,000 per month. According to the terms of the lease, monthly rentals will increase by the annual increase in the Consumer Price Index (CPI). Index decreases will not be considered. What are the lease payments for this contract?
VJ Leasing Company recently leased machinery to Berg Building Associates. The 5-year lease contract requires rental payments of $20,000 on January 1 of each year. The lease meets at least one of the Group 1 criteria. The 9% implicit rate on the lease is known to Berg Building Associates. There is a
Assume that Imprescia Industries leases machinery for 3 years with fixed rentals of $8,000 per year. The agreement also requires that lmprese a purchase consumables (such as lubrication, drive bells. and springs) directly from the lessor and must spend a minimum of $1,000 per year over the lease
Repeat E16-21 assuming that Gretta measures the debt security at fair value through OCI. Assume for simplicity that the carrying value is not reduced by amortization during 2017; thus, the carrying value on December 31, 2017, is $8,000 (accounting for the prior year write-down). Gretta determines
Hill view Homes, Ltd. granted options at the beginning of the current year to all its salaried employees. At the grant date, the options had a fair value of $900,000 and can be exercised only over a 3-year vesting period. At the end of the year, Hill view charged $300,000 to expense, assuming that
In deliberating on ASU 2016-02. Leases, the Board debated several methods for lease classification. What did the Board decide and why? What other methods did they consider and why did they not choose those methods? Provide citations t o the Basis for Conclusions of ASU 2016-02.
In the text, we discussed the practical, step-by-step approach for the subsequent measurement of an operating lease for the lessee. However, that exact approach is not specified by the Codification. Consider the following lease scenario.Baldwin Brokerage enters into a lease agreement with Hoyt
IFRS accounts for all leases in the same way (for the lessee), but U.S. GAAP measures lease-related expenses and the right-of-use asset for operating leases (lessee) differently than for finance leases.Requireda. Explain the subsequent measurement differences in operating leases and finance leases
On January 1, 2019 (lease inception date). Tofootles Company leases a piece of equipment from ABC Leasing Company. The lease term is for 4 years with the first payment of $1,000 due on January 1, 2019. The remaining three payments of $1,000 each are due on January 1, 2020, 2021, and 2022. In
You are reviewing the financial statements of Trident Incorporated and observed that Trident entered into a significant operating lease for office equipment at the end of the current year. Because of the nature of items leased and the length of the lease, you question the classification of the
On January 1, 2019, Lessee Company leased a piece of machinery from Lessor Bank. The machinery could also be used by other parties. The 14-year lease requires payments of $250,000 due at the beginning of each year. The lease agreement does not transfer ownership of the machinery nor does it contain
The lease rules discussed in this chapter have an effective date for fiscal years beginning after December 15, 2018. Under U.S. GAAP, the classification rules that were effective before that date are a bit different. Specifically. the Group 1 rules were as follows:1. The lease transfers ownership
Repeal the requirements of BE 18-9 for the lessor, Perry Leasing assuming that Perry is an IFRS reporter. Perry is not a dealer.Data from BE 18-9Jenkins Manufacturing Company leased a piece of nonspecialized machinery for use in its operations from Perry Leasing on January 1. The 10-year lease
Deane Company leases office space from Blossom Building Associates for a term of 20 years in order to expand its operations into the sou them region of the state. The office space includes the use of office equipment and computer equipment. In addition. Blossom will provide maintenance of all items
Bischoff Enterprises leases office space from Kally-Mack Properties for a term of 30 year's. The office space that is available will permit the use of existing office equipment and computer equipment. ln addition, Kally-Mack will deliver all maintenance services for all items of equipment,
Frankel Forges, Inc., an IFRS reporter, leases a high-capacity forge from Bleake Metal Works Company for total lease payments of $4,200, which is the fair value of the asset. Under the terms of the agreement, Frankel will make equal payments over the 42-month rental period. The journal entry made
DC Products, Inc. leases several copy machines from Avenue Office Services. Under the terms of the agreement, DC will pay rentals of $1,000 per month for an eight-month period. The journal entry made each month is:a. No entry is required under the short-term policy election. d. Rent Expense Cash
You are given the following information for a 4-year lease, with $65,000 payments due at the beginning of each year. The fair value of the underlying asset is $250,000 and the deferred initial indirect costs of the lessor amounted to $15,592. The lessor's estimated residual value in the underlying
Lowe Leasing Company recently leased machinery to Amina Associates. The 8-year lease contract requires rental payments of $11,000 at the beginning of each year. The lease meets at least one of the Group 1 criteria. The 4% implicit rate on the lease is known to Amina Associates. There is a $3,000
Insight Corporation leases equipment for 5 years with annual rentals o f $2,000 per year. The agreement also requires that Insight purchase supplies such as oil. fasteners, and filters directly from the lessor and must spend a minimum of $350 per year over the lease term. The total lease payments
Zhou Systems signed a 5-year lease at the beginning of the current year. The leased equipment is from standard dealer stock and has an economic life of 8 years and a fair value of $ 21,500. Under the terms of the lease, Zhou is required to pay $4,500 at the beginning of each year. There is no
Baxter Brothers, Inc. enters into a four-year equipment lease with annual payments of $ 700 per year. The lease payments are due at the beginning of each year. The implicit rate of interest is 5% and is known to Baxter.Baxter pays $250 in initial direct costs. The measurement of the lease liability
What types of payments are included in variable lease payments? How are variable lease payments treated in accounting for leases?
In a direct financing lease, does a lessor always report selling profit or loss on the sale of the leased asset at the lease commencement date? Explain.
How does the lessor measure the net investment in the lease for a lease classified as a sales-type lease?
What are the lessee's accounting and reporting requirements for the subsequent measurement of the lease transaction if a lease is classified as a finance lease?
What are the lessee's accounting and reporting requirements for the initial measurement of the lease transaction if a lease is classified as a finance lease?
What is the accounting treatment for initial direct costs the lessor pays?
What are the lessee's accounting and reporting requirements for the subsequent measurement of the lease transaction if a lease is classified as an operating lease?
What are the lessee's accounting and reporting requirements for the initial measurement of the lease transaction if a lease is classified as an operating lease?
What is the lessee's short-term lease policy election?
How does a lessee measure the lease liability?
What types of expenditures are included in initial direct costs paid by the lessee?
What is reported by a lessee under a lease when the lessee makes the short-term lease policy election?
What does the lessor report on the income statement wider an operating lease?
How does the probability of the collection of the lease payments and guaranteed residual value affect the net investment in lease by the lessor?
How does a guaranteed residual value affect the lease accounting for the lessor and the lessee?
What elements are included in the total lease payments?
What are the criteria for a lessee to report a finance lease?
Does a lessee have an option not to separate lease and nonlease components?
How does a lessor separate lease and nonlease components?
How does a lessee separate lease and nonlease components?
What components are included in a lease contract?
How is the right-of-use asset measured?
Over what time period does the lessee amortize the leased asset transferred by the lessor?
How does a lease offer business and financial flexibility for the lessee?
What are typical terms and provisions in a lease contract?
Who bears the risk of obsolescence in a lease transaction?
Repeat E16-23 assuming that Regal Inc. reports under IFRS.Data from E16-23Regal Inc., a U.S. GAAP reporter, holds an equity investment with a carrying value of $107,250. This investment is not publicly traded and Regal has elected to carry it at adjusted cost. At December 31, 2016, the fair value
Regal Inc., a U.S. GAAP reporter, holds an equity investment with a carrying value of $107,250. This investment is not publicly traded and Regal has elected to carry it at adjusted cost. At December 31, 2016, the fair value of the investment is $98,000, which was estimated by using a discounted
Simply Syrup Incorporated, a maple syrup maker, reported the following events causing differences between pretax accounting income and taxable income during its first full year or operations:In 2018, Simply Syrup purchased equipment costing $440,000 (with a useful life of 4 years and no salvage
CPF Corporation reported the following results for its first 3 years of operation:Description _____
In 2018, its first year of operations, Genius Corp. had a $700.000 net operating loss when the tax rate was 30%. There are no differences between book (GAAP) income and taxable income. In 2018, the management of Genius Corp. determined that it was more likely than not that it would not realize the
Michael's Incorporated reported the following tax information for its first 3 years of operations.Assume that in 2018, there are no uncertainties regarding the realization of the NOL carryforward benefits. All tax rates were enacted at the beginning of the year. No tax rule changes are known until
Andrew, Inc. provides DJ services for corporate parties. Andrew reported a net operating loss of $750,000 on its 2018 tax return. During the 3 preceding years, Andrew had taxable income and paid taxes at various tax rates as follows:Although Andrew had a net operating loss in 2018, it was because
The following information is available for the first 4 years of operations for Shooting Star Corporation:On January 2, 2018, the firm acquired heavy equipment costing $200,000 in a cash transaction. The equipment had a useful life of 5 years and no scrap value. The firm used the straight-line
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