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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
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?