Chapter 15 LeasesBRIEF Exercises DOCX

Title	Chapter 15 LeasesBRIEF Exercises
Author	Farhana Afrin
Pages	22
File Size	62.4 KB
File Type	DOCX
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Summary

Chapter 15 LeasesBRIEF EXERCISES Brief ––1 Because none of the four classification criteria is met, this is an operating lease. Accordingly, LTT will record rent expense for each of the four $25,000 payments, reducing its earnings by $100,000 each year. Brief Exercise 15–2 Because none of the four c...

Description

Brief ––1 Because none of the four classification criteria is met, this is an operating lease. Accordingly, LTT will record rent expense for each of the four $25,000 payments, reducing its earnings by $100,000 each year. Brief Exercise 15–2 Because none of the four classification criteria is met, this is an operating lease. Accordingly, Lakeside will record rent revenue for each of the four $25,000 payments, increasing its earnings by $100,000 each year. In addition Lakeside, as owner of the asset, will record depreciation. Assuming straight-line depreciation of the $2 million cost over the 25-year life, that's $80,000 depreciation expense each year. So, earnings are increased by a net $20,000 ($100,000 – 80,000). Brief Exercise 15–3 Because this is an operating lease, Ward will record rent expense for each of the $5,000 payments. The advance payment also represents rent, recorded initially as prepaid rent and allocated equally over the 10 years of the lease. As a result, Ward's rent expense for the year reduces its earnings by $70,000 each year. $5,000 x 12 = $60,000 $100,000 ÷ 10 = 10,000 $70,000 © The McGraw-Hill Companies, Inc., 2013 Solutions Manual, Vol.2, Chapter 15 15– Chapter 15 LeasesBRIEF Exercises...