Reference no: EM13133475
On January 1, 2008, Grate Company (as lessor) entered into a noncancelable lease agreement with Barrell Company for machinery which was carried on the accounting records of Grate at $4,530,000 and had a market value of $5,000,000. Minimum lease payments under the lease agreement which expires on December 31, 2017, total $7,100,000. Payments of $710,000 are due each January 1. The first payment was made on January 1, 2008 when the lease agreement was finalized. The interest rate of 10% which was stipulated in the lease agreement is the implicit rate set by the lessor. The effective interest method of amortization is being used. Barrell expects the machine to have a ten-year life with no salvage value, and be depreciated on a straight-line basis. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.
Instructions
(a) From the lessee's viewpoint, what kind of lease is the above agreement?
(b) Ignoring income taxes, what should be the expenses incurred by Barrell from this lease for the year ended December 31, 2008?
(c) What journal entries should be recorded by Barrell Company on January 1, 2008?
|
Compute for the company break-even point
: Compute for the company's break-even point in unit sales using the equation method.
|
|
Calculate confidence interval-sample standard deviation
: The sample standard deviation is $2,050. Using this information, calculate the 95% confidence interval (rounded to the nearest $10). Interpret your findings.
|
|
Explain to wendy at least key controls she must establish
: Explain to Wendy at least 4 key controls she must establish to protect herself against fraud. You should state specific internal control principles and relate your answer to her hair salon business.
|
|
Unconsolidated requirement under gaap
: AVPR Company sets up a qualifying SPE to sell their accounts receivable (A/R) to the SPE. The SPE meets the unconsolidated requirement under GAAP. The most likely outcome of using the SPE by AVPR will be to:
|
|
What journal entries should be recorded by barrell company
: Ignoring income taxes, what should be the expenses incurred by Barrell from this lease for the year ended December 31, 2008? What journal entries should be recorded by Barrell Company on January 1, 2008?
|
|
Complete a time-sensitive project
: Rigorously analyze the issues you have identified. Base your arguments on data in the case. Demonstrate your critical thinking ability, creativity, and insight, as well as appropriate use of the tools provided in the text or in previous courses.
|
|
What is the company contribution margin
: Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and fixed expenses were $45,000.
|
|
How would the store account for a purchase using discount
: The coupons expire in one year. The store normally recognizes a gross profit margin of 40% of the selling price on video games. How would the store account for a purchase using the discount coupon?
|
|
Full year of depreciation expense
: Captain Inc. purchases a depreciable asset for $100,000. The life of the asset is 10 years and it has an estimated salvage value of $10,000. Captain Inc. takes a full year of depreciation expense in the year the asset is acquired. Which of the fol..
|