Accounting 3 In Tutorial Library

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TITLE: Accounting 3

CLASS / COURSE: Accounting


1.  A lease involves payments of $1,000 per month for two years.  The payments are made at the end of each month.  The lease also involves a guaranteed residual value of $10,000 to be paid at the end of the 2-year period.  The appropriate interest rate is 12% compounded monthly.  Compute the present value of the minimum lease payments.

2.  The lessor leased equipment to the lessee.  The fair value of the equipment is $246,000.  Lease payments are $35,000 per year, payable at the end of the year, for 10 years.  The interest rate implicit in the lease is 9%.  At the end of 10 years, the lessor will repossess the equipment.  The lease does not include a bargain purchase option, and the equipment has a total estimated useful life of 15 years.  Is the lease an operating lease or a capital lease?  Explain.

3.  On January 1, the lessee company signed an operating lease contract.  The lease contract calls for $3,000 payments at the end of each year for 10 years.  The rate implicit in the lease is 10%.  Make the journal entries or memorandum necessary on the books of the lessee company (1) on the lease-signing date and (2) to record the first payment.

4.  Pursuit Company leased a machine on July 1, 2013, under a 10-year lease.  The economic life of the machine is estimated to be 15 years.  Title to the machine passes to Pursuit at the expiration of the lease, and thus, the lease is a capital lease.  The lease payments at $97,000 per year, including executory costs of $3,000 per year, all payable in advance annually.  The incremental borrowing rate of the company is 9%, and the lessor's implicit interest rate is unknown.  Pursuit Company uses the straight-line method of amortization and the calendar year for reporting purposes.

5.  Talbert, Inc. computed pretax financial income of $40,000 for the first year of its operations ended December 31, 2013.  Included in financial income was $25,000 of nondeductible expenses, $22,000 gross profit on installment sales that was deferred for tax purposes until the installments were collected, and $18,000 in bad debt expense that had been accrued on the books in 2013.

6.  The following information is taken from the financial statements of Neptune Enterprises:

7.  Young Fashions, Inc's employees are paid on the 6th and 22nd of each month for the period ending the last day of the previous moth and the 15th of the current month, respectively.  An analysis of the payroll on Monday, October 6, 2013 revealed the following data:

8.  During Year 1 (the first year of the company's existence), employees of the company earned vacation days as follows:

9.  On January 1 of Year 1, the company had a projected benefit obligation (PBO) of $10,000 and a pension fund with a fair value of $9,200.  Unrecognized prior service cost was $2,000; it was being amortized on a straight-line basis over the 5-year average remaining life of the affected employees.  The balance in the unrecognized (or deferred) pension gain was $700.  The following information relates to the pension plan during the year:

10.  Transactions involving the common stock of Par-More Company during the 2-year period 2013 and 2014 were as follows:

11.  Marcina Shoes reports long-term liabilities and stockholders' equity balances at December 31, 2013, as follows:

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1. Finance
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3. Accounting


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