Intermediate Accounting PPE REVALS PDF

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INTERMEDIATE ACCOUNTING 2 FINALS SOLVINGSCH 11-On January 1, 2020, Northstar Company entered into an 8-year lease of a floor of building with useful life of 15 years with the following terms:Annual rental for the first three years payable at the end of each year 300, Annual rental for the next five ...

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INTERMEDIATE ACCOUNTING 2 FINALS SOLVINGS CH 11-7 On January 1, 2020, Northstar Company entered into an 8-year lease of a floor of building with useful life of 15 years with the following terms: Annual rental for the first three years payable at the end of each year Annual rental for the next five years payable at the end of each year Implicit interest rate PV of an ordinary annuity of 1 at 10% for three periods PV of an ordinary annuity of 1 at 10% for five periods

300,000 400,000 10% 2.49 3.79

The lease provides for neither a transfer of title to the lessee nor a purchase option. What is the lease liability on January 1, 2020? 1, 516, 000 2, 263, 000 1,884,000 1, 697, 250 What is the interest expense for 2020? 188, 400 226, 300 151, 600 169,725 What is the interest expense for 2023? 151, 460 126, 606 164, 964 200, 000 What is the lease liability on December 31, 2023? 1, 614, 604 1, 266, 064 1,366, 064 1, 214, 604

CH 12- 10 Conn Company owns an office building and normally charges tenants P3,000 per square meter per year for office space. Because the occupancy rate is low, Conn Company agreed to lease 1,000 square meters to Hanson Company at P1,200 per square meter for the first year of a three-year operating lease. Rent for remaining years will be at the P3,000 rate. Hanson Company moved into the building on January 1, 2020, and paid the first year’s rent in advance. What amount of rental revenue should be reported in the income statement for the year ended September 30, 2020? 2, 400,000 1,200,000 1,800,000 900,000

CH 12- 11 Wall Company leased an office to Fox Company for a five-year term beginning January 1, 2020. Under the terms of the operating lease, rent for the first year is P800,000 and the rent for years 2 through 5 is P1,250,000 per annum. However, as an inducement to enter the lease, Wall Company granted Fox Company the first six months of the lease rent-free. What amount should be reported as rental income for 2020? 1,200,000 1,160,000 1,080,000 800,000

CH 12- 12 On January 1, 2020, Abba Company leased a building to Bee Company under a four-year operating lease. The monthly rental for 2020, 2021, 2022 and 2023 is P100,000, P150,000, P200,000 and P250,000, respectively. Rentals are payable at the end of each month. All rental payments within the year were made when due. What amount should be reported as rent receivable from Bee Company on December 31, 2021? 1,000,000 1,200,000 600,000 900,000

CH 12-13 Abe Company, lessor, leased an equipment under an operating lease. The lease term is 5 years payments are made in advance on January 1 of each year as shown in the following schedule: January 1, 2020 1,000,000 January 1, 2021 1,000,000 January 1, 2022 1,400,000 January 1, 2023 1,700,000 January 1, 2024 1,900,000 On December 31, 2021, what amount should be reported as rent receivable? 1, 400,000 800,000 400,000 0

CH 12-14 At the beginning of current year, Wren Company leased a building to Brill Company under an operating lease for ten years at P500,000 per year, payable the first day of each lease year. Wren Company paid P150,000 to a real estate broker as initial direct cost. The building is depreciated P120,000 per year. Wren Company incurred insurance and property tax expense totaling P90,000 for the current year. What is the net rent income for the current year? 275,000 290,000 350,000 365,000

CH 12-15 At the beginning of current year, Rapp Company leased a new machine to Lake Company for 5 years. The annual rent is P900,000. Additionally, Lake Company paid P500,000 to Rapp Company as a lease bonus and P250,000 as a security deposit to be refunded upon expiration of the lease. What amount should be reported as rent revenue for the current year? 1, 400,000 1, 250,000 1,000,000 900,000

CH 13-7 At the beginning of current year, Lessor Company leased a machine to Lessee Company. The machine had an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual lease payments of P1,730,541 are made each December 31. The machine reverts to Lessor at the end of the lease term, at which time the residual value of the machine will be P400,000. The residual value is unguaranteed. The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15% for 5 periods is 3.3522. At the commencement date of the lease, what would be the net lease receivable on the part of the lessor? 6,400,000 5,801,120 6,000,000 5,600,000 What is the gross investment in the lease? 8,652,705 9,052,705 6,000,000 8,252,705 What is the total unearned interest income? 3,052,705 2,652,705 2,252,705 6,000,000 What is the interest income for the current year? 1,297,905 1,357,905 900,000 870,168

CH 13-8 On January 1, 2020, Lyle Company entered into a direct financing lease. A third party guaranteed the residual value of the asset under the lease estimated to be P1,200,000 on January 1, 2025, the end of the lease term. Annual lease payments are P1,000,000 due each December 31, beginning December 1, 2020. The last payment is due December 31, 2024. The remaining useful life of the asset was six years at the commencement of the lease. The lessor used 10% as the implicit rate. The PV of 1 at 10% for 5 periods is .62, and the PV of an ordinary annuity of 1 at 10% for 5 periods is 3.79. What is the net lease receivable of the lessor at the commencement of the lease? 4,534,000 3,790,000 4,990,000 2,590,000 What is the gross investment in the lease? 5,000,000 6,200,000 3,800,000 5,744,000 What is the total unearned interest income? 2,410,000 1,666,000 1,210,000 466,000 What is the interest income for 2020? 379,000 620,000 453,400 500,000

CH 13-9 Glade Company leases computer equipment under a direct financing lease. The equipment has no residual value at the end of the lease and the lease does not contain purchase option. The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of P3,234,000. The present value of an annuity due to 1 at 8% for 5 years is 4.312. What total amount of interest revenue should be recognized over the lease term? 1,293,000 1,394,500 516,000 750,000

CH 13-10 At the beginning of current year, Nueva Company, as lessor, leased an equipment for ten years at an annual rental of P1,200,000, payable by Caster Company, the lessee, at the beginning of each year. The lease is appropriately accounted for as finance lease. The equipment had a cost of P8,400,000 with an estimated life of 12 years and no residual value. The straight line depreciation is used. The implicit rate is 9%. What amount of interest income should be reported in the income statement for the current year? 500,000 648,000 756,000 360,000

CH 13-11 Cassandra Company is in the leasing business. The entity acquired a specialized packaging machine for P3,000,000 cash and leased it for a period of six years, after which the machine is to be returned to Cassandra Company for disposition. The guaranteed residual value of the machine is P200,000. The lease term was arranged so that a return of 12% is earned by Cassandra Company. The PV of 1 at 12% for six periods is 0.51 and the present value of an annuity of 1 in advance at 12% for six periods is 4.60. What is the annual lease payment payable in advance required to yield the desired return? 630,000 652,174 608,695 732,000

CH 13-12 Magnum Company had an asset costing P5,239,000. The asset was leased at the beginning of the current year to another entity. Five annual lease payments are due in advance at the beginning of each lease year. The lessee guaranteed the P2,000,000 residual value of the asset at the end of the 5-year lease term. The lessor’s implicit interest rate is 8%. The PV of 1 at 8% for 5 periods is 0.68, and the PV of an annuity of 1 in advance at 8% for 5 periods is 4.31. What is the annual lease payment? 1,215,545 1,531,090 900,000 751,500

CH 13-13 Ericson Company leased an asset to another entity. The cost of the asset was P7,994,000. Terms of the lease specify four-year for the lease, an annual interest rate of 15%, and four year-end rental payments. The lease qualified as a direct financing lease. The lease provided for a transfer of title to the lessee at the end of the lease term. After the fourth year, the residual value was estimated at P1,000,000. The PV of 1 at 15% for 4 periods is .572 and the PV of an ordinary annuity of 1 at 15% for4 periods is 2.855. What is the annual rental payment? 2,000,000 3,000,350 2,800,000 2,599,650

CH 13-14 Irene Company acquired a specialized machine for P2,300,000. At the beginning of current year, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due in advance at the beginning of each lease year. The residual value of the machine is P200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51 and the present value of an annuity in advance of 1 at 12% for six periods is 4.60. What is the annual lease rental payable in advance? 500,000 477,826 383,333 460,000

CH 14-10 At the beginning of current year, Howe Company leased equipment to Kew Company for an eight-year period. Equal payments under the lease are P500,000 and are due at the beginning of the year. The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000. The lease is appropriately accounted for as a sales type lease. The present value of the lease payments at an implicit interest rate is 12% is P2,780,000. What amount of profit on the sale should be reported for the current year? 900,000 780,000 240,000 333,600

CH 14-11 Gold Company leased equipment to Fair Company and properly recorded the sales type lease. The eight annual payments of P300,000 are due at the beginning of each year. The lessor had purchased the equipment for P1,100,000 and had a list price of P1,800,000. The present value of the lease payments is P1,700,000. The imputed interest rate on the lease was 11% and the lessee had an incremental borrowing rate of 10%. What profit on sale should be reported in the current year? 380,000 600,000 220,000 0 What amount of interest income should be reported the current year? 165,000 140,000 187,000 154,000

CH 14-12 On July 1, 2020, Meg Company leased equipment to Wee Company for an 8-year period. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2020. The interest rate contemplated by Meg company and Wee Company is 10%. The cash selling price of the equipment is P3,520,000 and the cost of the equipment on Meg Company’s accounting records is P2,800,000. The lease is appropriately recorded as a sales type lease. What amount of profit on sale should be recognized for the year ended December 31, 2020? 600,000 720,000 360,000 300,000 What amount of interest revenue should be recorded for the year ended December 31, 2020? 292,000 146,000 352,000 176,000

CH 14-13 On January 1, 2020, Gallant Company entered into a lease agreement with Blacksheep Company for a machine which was carried on the accounting records of Gallant Company at P2,000,000. Total payments under the lease which expires on December 31, 2029 aggregate P3,550,800 of which P2,400,000 represents cost of the machine to Blacksheep Company. Payments of P355,080 are due each January 1 of each year. The interest rate of 10% which was stipulated in the lease is considered and adequate compensation to Gallant Company. Blacksheep Company expects the machine to have a 10-year life, no residual value and be depreciated on a straight line basis. The lease qualifies as a sales type lease. What amount should be recognized by Gallant as profit from sales for the year ended December 31, 2020? 1,150,800 1,550,800 400,000 355,080 What amount of interest income should be recognized by Gallant for the year ended December 31, 2020? 244,080 200,000 204,492 240,000 What total income before tax should be recognized by Gallant from the lease for the year ended December 31, 2020? 204,492 604,492 355,080 755,080

CH 14-14 Reagan Company used leases as a method of selling products. In 2020, Reagan Company completed construction of a passenger ferry. On January 1, 2020, the ferry was leased to the Super Ferry Line on a contract specifying that ownership of the ferry will transfer to the lessee at the end of the lease period. Original cost of the ferry Fair value of ferry at lease date Lease payments in advance Residual value Implicit interest rate Date of first lease payment Lease term PV of an annuity due of 1 at 10% for 20 periods PV of 1 at 12% for 20 periods What is the gross investment in the lease? 30,000,000 32,000,000 10,000,000 38,000,000 What is the net investment in the lease? 12,555,000 13,000,000 12.755,000 8,000,000 What is the gross profit on sale for 2020? 6,555,000 4,555,000 5,000,000 7,000,000 What is the interest income for 2020? 1,506,600 1,560,000 1,326,600 1,380,000

8,000,000 13,000,000 1,500,000 2,000,000 12% January 1, 2020 20 years 8.37 0.10

CH 15-9 On December 31, 2020, Bain Company sold a machine to Ryan Company and simultaneously leased it back for one year. The entity provided the following information at this date: Sales price Carrying amount Present value of reasonable lease rentals (P30,000 for 12 months @ 12%) Estimated remaining useful life

360,000 330,000 341,000 12 years

In the income statement for 20202, what amount should be reported as gain from the sale of the machine? 34,100 30,000 4,100 0

CH 15-10 On December 31, 2020, Lane Company sold equipment to Noll Company and simultaneously leased it back for 3 years. The leaseback is appropriately considered a low value lease. Sale price Carrying amount Estimated remaining economic life

480,000 360,000 5 years

What amount should be reported as a gain from sale of equipment for 2020? 120,000 60,000 40,000 0

CH 15-11 At the beginning of current year, Racquel Company sold a building and immediately leased it back. The following data pertain to the sale and leaseback transaction: Sales price at above fair value Fair value of the building Carrying amount of the building Annual rental payable at the end of each year Remaining life of the building Lease term Implicit interest rate PV of ordinary annuity of 1 at 12 % for 4 periods What is the initial lease liability? 1,822,200 2,400,000 1,200,000 1,000,000 What is the cost of right of use asset? 1,639,980 739,980 822,200 411,100 What is the gain on right transferred to buyer-lessor? 800,000 720,000 717,780 400,000 What is the annual rental income of the buyer-lessor? 600,000 329,272 270, 728 300,000

9,000,000 8,000,000 7,200,000 600,000 20 years 4 years 12% 3.037

CH 15-12 At beginning of the current year, Arianne Company sold a machine and immediately leased it back. Sales price at fair value Carrying amount of the machine Annual rental payable at the end of each year Remaining life of the machine Lease term Implicit interest rate PV of ordinary annuity of 1 at 6% for 5 periods What is the cost of right of use of asset? 2,105,000 2,526,000 2,895,000 1,500,000 What is the loss on right transferred to the buyer-lessor? 579,000 505,200 500,000 0 What is the lease liability at year-end? 2,177,560 1,605,000 1,731,300 2,105,000 What is the net annual rental income of the buyer-lessor? 373,700 200,000 500,000 250,000

5,000,000 6,000,000 500,000 20 years 5 years 6% 4.21

CH 17-10 Jessabel Company has established a defined benefit pension plan for an employee. Annual payments under the pension plan are equal to the employee’s highest lifetime salary multiplied by 3% multiplied by numbers of years with the entity. On December 31, 2020, the employee had worked for Jessabel Company for 15 years. The current salary is P500,000. The employee is expected to retire in 5 years and the salary increases are expected to average 4% per year during that period. The employee is expected to live for 6 years after retiring and will receive the first annual pension payment one year after retirement. The discount rate is 12%. Future value of 1 at 4% for 5 periods PV of an ordinary annuity of 1 at 12% for 6 periods PV of 1 at 12% for 5 periods

1.217 4.111 0.567

What is the projected benefit obligation on December 31,2020? 638,269 225,000 524,460 608,500 CH 17-11 A director of Ester Company shall receive a retirement benefit of 20% of final salary per annum for a contractual period of three years. The anticipated salary is P1,000,000 for 20202, P1,200,000 for 2021 and P1,500,000 for 2022. The discount rate is 10%. The PV of 1at 10% is .909 for one period and .826 for two periods. Under the projected unit credit method, what is the estimated pension liability on December 31, 2021? 900,000 520,500 600,000 545,280

CH 18-9 Seda Company provided the following information pertaining to a pension plan for the current year: Actuarial value of projected benefit obligation at the beginning of year Assumed discount rate Service cost Pension benefit paid

7,200,000 10% 1,800,000 1,500,000

No change in actuarial estimated occurred during the current year What is the projected benefit obligation at year-end? 6,420,000 7,500,000 7,920,000 8,220,000

CH 18-10 Greenbelt Company provided the following information with respect to the defined benefit plan for the current year: Projected benefit obligation: January 1 December 31 Contribution to the plan Benefits paid to retirees Settlement discount rate

3,000,000 3,500,000 600,000 500,000

What is the current service cost for the current year? 700,000 600,000 500,000 300,000

10%

CH 18-11 Bronson Company received the following report from the independent actuary in relation to a defined benefit pension plan at year-end: Pension benefits paid PBO at year-end Interest expense on PBO Discount rate

135,000 2,160,000 120,000 8%

What is the current service cost for the current year? 675,000 810,000 540,000 255,000

CH 18-12 Winter Company provided the following defined benefit plan information for the current year: January 1

Projected benefit obligation Accumulated benefit obligation During the year Pension benefits paid Actuarial loss Past service cost December 31 Projected benefit obligation Accumulated benefit obligation Discount rate

3,500,000 2,600,000 250,000 200,000 500,000 4,700,000 3,600,000 10%

There is no change in actuarial assumptions during the current year. What is the current service cost for the current year? 400,000 800,000 200,000 750,000

CH 18-13 Gail Company provided followinginformation pertaining to defined benefit plan for the current year: Fair value of plan assets, beginning of year Fair value of plan assets, end of year Employer contributions Benefits paid

3,500,000 5,250,000 1,100,000 850,000

What was the actual return on plan assets? 1,500,000 2,600,000 1,750,000 650,000

CH 18-14 Manaoag Company maintains a fund to cover a pension plan with the following data for the current year: January 1

Fair value of plan assets Market-related value of pension fund (5-year weighted average) During the year Pension benefits paid Contribution to the fund Actual return on plan assets What is the fair value of plan assets on December 31? 8,200,000 9,800,000 7,250,000 8,850,000

8,750,000 7,150,000 600,000 700,000 950,000

CH 18-15 Caticlan Company provided the following information:

Fair value of plan assets Market related value of plan assets Contribution plan Benefits paid to retirees

January 1 3,500,000 2,800,000

December 31 3,900,000 2,900,000 280,000 250,000

What is the actual return on plan assets for...