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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?
Question 12
On July 1, 2004, Balt Co. exchanged a truck for 25 shares of Ace
Corp.'s common stock. Assume commercial substance.On that
date, the truck's carrying amount was $2,500, and its fair value
was $3,000. Also, the book value of Ace's stock was $60 per share.
On December 31, 2004, Ace had 250 shares of common stock
outstanding and its book value per share was $50. What amount
should Balt report in its December 31, 2004, balance sheet as
investment in Ace?