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Baxter Company leased equipment to Fritz Inc. on January 1, 2002. The lease is for an eight-year period expiring December 31, 2009. The first of eight equal annual payments of $900,000 was made on January 1, 2002. Baxter had purchased the equipment on December 29, 2001 for $4,800,000. The lease is appropriately accounted for as a sales-type lease by Baxter. Assume that the present value at January 1, 2002, of all rent payments over the lease term discounted at a 10 percent interest rate was $5,280,000. What amount of interest revenue should Baxter record in 2003 (the second year of the lease period) as a result of the lease?
a. 490,000
b. 480,000
c. 438,000
d. 391,000
Assume Simple Co. had credit sales of $282,000 and cost of goods sold of $138,000 for the period. Simple uses the percentage of credit sales method and estimates that 0.25 percent of credit sales would result in uncollectible accounts. Before the ..
James receives a gift of rare books valued at $10,000. The books have an adjusted basis of $6,000 to the donor. Several months later, James sells the books to a professional collector for $9,000. What is James‘s gain or (loss) on the sale?
In the current year, Crow Corporation, a closely held C corporation that is not a personal service corporation, has $100,000 of passive losses, $80,000 of active business income, and $20,000 of portfolio income. How much of the passive loss may Cr..
If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?
In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. What is the firm's times interest earned ratio?
Assume that the market interest rate at the date of issuance is 10 percent (5 percent per semiannual period). What is the issue price of the bond?
The entity's balance date is 30 June, and it uses the straight-line method of depreciation. On 1 July 2011, the value is use was estimated to be $45,000 and the net selling price was $48,750. Prepare the journal entries in relation to the equipmen..
Assume simplified straight line depreciation , this machine is being depreciated down to zero a 34% marginal tax rate and a required rate of 12 %.
Skipper, Inc., earns pretax book net income of $500,000 in 2011. Skipper acquires a depreciable asset in 2011, and first-year tax depreciation exceeds book depreciation by $80,000.
Compute the gain or loss Howard must recognize on the distribution? Calculate Howard's basis in the stock he received in the distribution?
What other factor might influence the risk of material misstatement in the expenditure cycle?
Explain what is meant by the test data approach. What are the major difficulties with using this approach? Define parallel simulation with audit software and provide an example of how it can be used to test a client's payroll system.
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