5 CH 21 Homework Templates Ch21

CHAPTER 21
Accounting for Leases

EXERCISE 21-3 (2030 minutes)
Capitalized amount of the lease:
Yearly payment
Executory costs
Minimum annual lease payment
EXERCISE 21-3 (Continued)
Present value of minimum lease payments
$69,529 X 6.32825 = $440,000*
*rounded by $3.
1/1/14
Leased Buildings...............................
Lease Liability............................
1/1/14
Executory Costs..................................
Lease Liability....................................
Cash............................................
12/31/14
Depreciation Expense.......................
Accumulated Depreciation
Capital Leases........................
12/31/14
Interest Expense
(See Schedule 1)............................
Copyright 2013 John Wiley & Sons, Inc.Kieso, Intermediate Accounting, 15/e, Solutions Manual (For Instructor Use Only)
21-1
Interest Payable.........................
1/1/15
Executory Costs..................................
Interest Payable.................................
Lease Liability....................................
Cash............................................
12/31/15
Depreciation Expense.......................
Accumulated Depreciation
Capital Leases........................
12/31/15
Interest Expense................................
Interest Payable.........................
EXERCISE 21-6 (1520 minutes)

(a) $35,013 X 5.7122* = $200,001
*Present value of an annuity due of 1 for 8 periods at 11%.
(b) 1/1/14
Lease Receivable................................
Cost of Goods Sold.............................
Sales Revenue.............................
Inventory......................................
1/1/14
Cash.....................................................
Lease Receivable.........................
EXERCISE 21-6 (Continued)

12/31/14
21-2
Interest Receivable.............................
Interest Revenue..........................
PROBLEM 21-4
(a) 1.
2.
Interest expense (See amortization schedule)

Lease executory expense
Depreciation expense ($300,383 6 = $50,064)
Current liabilities:
Lease liability
Interest payable
Long-term liabilities:
Lease liability
Property, plant, and equipment:
Leased equipment
Accumulated depreciationcapital leases
3.
Interest expense (See amortization schedule)

Depreciation expense)
4.
Lease liability
Interest payable
21-3
Lease liability
Leased Equipment
(b) 1.
Interest expense
Depreciation expense
PROBLEM 21-4 (Continued)

2.
Lease liability
Interest payable
Lease liability

Leased equipment
Current assets:
3.
21-4
Prepaid lease executory costs
Interest expense

Depreciation expense
4.
Lease liability
Interest payable
Lease liability
Leased equipment
Current assets:
Prepaid lease executory costs
21-5
PROBLEM 21-6
Note: This lease is a capital lease to the lessee because the lease term
(six years) exceeds 75% of the remaining economic life of the asset (six years).
Also, the present value of the minimum lease payments exceeds 90% of the
fair value of the asset.
Annual rental payment
PV of an annuity-due of 1 for n = 6, i = 12%
PV of periodic rental payments
Guaranteed residual value
PV of 1 for n = 6, i = 12%
PV of guaranteed residual value
PV of periodic rental payments
PV of guaranteed residual value
PV of minimum lease payments
(a) VANCE COMPANY (Lessee)
Lease Amortization Schedule
Date
Annual Lease
Payment Plus
Reduction of
GRV
Interest (12%) Lease Liability Lease Liabilit
on Liability
1/1/14
1/1/14
$124,798
1/1/15
124,798
1/1/16
124,798
1/1/17
124,798
1/1/18
124,798
1/1/19
124,798
12/31/19
21-6
50,000
$798,788
*Rounding error is $1.
**Rounding error is $3.
21-7
(b) January 1, 2014

Leased Equipment...................................................
Lease Liability...................................................
Lease Liability..........................................................
Cash...................................................................
During 2014
Executory Costs......................................................
Cash...................................................................
December 31, 2014
Interest Expense......................................................
Interest Payable................................................
Depreciation Expense.............................................
Accumulated DepreciationCapital
Leases...........................................................
January 1, 2015
Interest Payable.......................................................
Interest Expense...............................................
Lease Liability..........................................................
Cash...................................................................
During 2015
Executory Costs......................................................
Cash...................................................................
December 31, 2015
21-8
Interest Payable................................................
Depreciation Expense.............................................
Accumulated DepreciationCapital
Leases...........................................................
21-9
(Please Note: The guaranteed residual value was subtracted for

purposes of determining the depreciable base. The reason is that at
the end of the lease term, hopefully, this balance can offset the remaining
lease obligation balance. To depreciate the leased asset to zero might lead
to a large gain in the final years if the asset has a value at least equal to
its guaranteed amount.)
21-10
21-11

5 CH 21 Homework Templates Ch21

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CHAPTER 21

Accounting for Leases

EXERCISE 21-6 (1520 minutes)

EXERCISE 21-6 (Continued)

Interest expense (See amortization schedule)

Interest expense (See amortization schedule)

PROBLEM 21-4 (Continued)

Property, plant, and equipment:

Prepaid lease executory costs

Lease executory expense

Prepaid lease executory costs

PROBLEM 21-6 (Continued)

(b) January 1, 2014

PROBLEM 21-6 (Continued)

(Please Note: The guaranteed residual value was subtracted for

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