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On January 1 of the current year, Tell Co. leased equipment from Swill
Co. under a nine-year sales-type lease. The equipment had a cost of
$400,000 and an estimated useful life of 15 years. Semiannual lease
payments of $44,000 are due every January 1 and July 1. The present
value of lease payments at 12% was $505,000, which equals the sales
price of the equipment. Using the straight-line method, what amount
should Tell recognize as depreciation expense on the equipment in the
current year?
Question 9
A twenty-year property lease, classified as an operating lease, provides
for a 10% increase in annual payments every five years. In the sixth year
compared to the fifth year, the lease will cause the following expenses to
increase
Question 10
Gei Co. determined that, due to obsolescence, equipment with an
original cost of $900,000 and accumulated depreciation at January 1,
2004 of $420,000 had suffered permanent impairment, and as a result
should have a carrying value of only $300,000 as of the beginning of the
year. In addition, the remaining useful life of the equipment was reduced
from 8 years to 3. In its December 31, 2004 balance sheet, what amount
should Gei report as accumulated depreciation?
Question 11
Dahl Co. traded a delivery van and $5,000 cash for a newer van owned
by West Corp. Assume there is no commercial substance to the
exchange. The following information relates to the values of the vans on
the exchange date: Dahl's income tax rate is 30%. What amounts should
Dahl report as gain on exchange of the vans?