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Question 1
1.

A Company leases equpiment from B Company on January 1, 2009. The 10 year noncancelable lease agreement requires that rental payments of $10,000 be made at the end of each year starting on December 31, 2009. The equpiment has a guaranteed residual value of $1,000 at the end of its 10 year economic life. The lease contract specifies that the equipment may be purchased for $5 at the end of the lease term (this amount is substaintially lower than the estimated fair market value of the asset on that date). At the inception of the lease, the fair market value of the leased asset is $56,000. The lessee's incremental borrowing rate is 12%, and the lessor's implicit rate is not known.
o Present value factor of $1, 10 periods, 12%: 0.3220
o Present value factor of an ordinary annuity, 10 periods, 12%: 5.6502
o Present value factor of an annuity due, 10 periods, 12%: 6.3283
What should be the value of the leased asset recorded by the lessee on January 1, 2009?
Answer



Question 2
1.

U Company leases equpiment from O Company on January 1, 2009. The 10 year noncancelable lease agreement requires that rental payments of $ 12,635 be made at the end of each year starting on December 31, 2009. The equpiment has an unguaranteed residual value of $ 1,579 at the end of its 12 year economic life. The equipment will transfer ownership to the lessee at the end of the lease term. The lessee's incremental borrowing rate is 12%, and the lessor's implicit rate is not known.
o Present value factor of $1, 10 periods, 12%: 0.3220
o Present value factor of an ordinary annuity, 10 periods, 12%: 5.6502
o Present value factor of an annuity due, 10 periods, 12%: 6.3283
If the lessee uses straight-line depreciation, what amount of depreciation expense should be taken for the leased equipment on December 31, 2009? Round your final answer to the nearest dollar.
Answer


Question 3
1.

On January 1, 2008, Dex, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Grr Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.
o The agreement requires equal rental payments at the end of each year.
o Grr purchased the building for $ 208,806 on December 31, 2007 and that amount is considered to be the building's fair value.
o The building has an estimated economic life of 10 years, with an unguaranteed residual value of $25,000.
o Grr requires a 10% rate of return.
o Present value factor of $1, 10 periods, 10%: 0.3855
o Present value factor of an ordinary annuity, 10 periods, 10%: 6.1446
o Present value factor of an annuity due, 10 periods, 10%: 6.7590
What should be the amount of the annual rental payments? Round your final answer to the nearest dollar.
Answer


Question 4
1.

On January 1, 2011, Sam Company purchased 9% bonds with a face value of $200,000 at 97 to yield an effective interest rate of 10%. The bonds pay interest annually. At the end of 2011 the market value of the bonds was 197,642, and at the end of 2012 the market value of the bonds was 210,165.

If the bonds are classified as available-for-sale, what should be the unrealized holding gain recognized on December 31, 2011?
Answer


Question 5
1.

Igor Company purchase 22% of Mouse Company's $10 par common stock for $213,128. That year mouse declared dividends of 13,469 and reported net income of 90,185. What is the value of Igor's investment in Mouse Company at the end of the year? Round your answer to the nearest dollar.
Answer


Question 6
1.

On January 1, 2011, Sam Company purchased 9% bonds with a face value of $200,000 at 97 to yield an effective interest rate of 10%. The bonds pay interest annually. At the end of 2011 the market value of the bonds was 205,209, and at the end of 2012 the market value of the bonds was 192,803.

If the bonds are classified as available-for-sale, what should be the unrealized holding loss recognized on December 31, 2012?