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retains the right to substantially all of the remaining use of the
property.
Question 6
The following information pertains to a sale and leaseback of
equipment by Mega Co. on December 31, 2005: What amount of
deferred gain on the sale should Mega report at December 31,
2005?
Question 7
On August 1, 2005, Metro, Inc. leased a luxury apartment unit to
Klum. The parties signed a 1-year lease beginning September 1,
2005 for a $1,000 monthly rent payable on the first day of the
month. At the August 1 signing date, Metro collected $540 as a
nonrefundable fee for allowing Klum to sign a 1-year lease (the
normal lease term is three years) and $1,000 rent for September.
Klum has made timely payments each month, but prepaid
January's rent on December 20. In Metro's 2005 income
statement, rent revenue should be reported as
Question 8
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