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    Audprob Answer 9 and 10

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    venice cambry
    The document provides information about two companies, Ramirez Company and East Company, that have entered into lease agreements. It includes details of the lease terms and asks multiple choice questions to calculate financial values related to the initial recognition and ongoing accounting of the leases, such as the initial lease liability, cost of the right-of-use asset, depreciation, and lease liability at year-end.

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    Audprob Answer 9 and 10

    Uploaded by

    venice cambry
    57 views2 pages
    The document provides information about two companies, Ramirez Company and East Company, that have entered into lease agreements. It includes details of the lease terms and asks multiple choice questions to calculate financial values related to the initial recognition and ongoing accounting of the leases, such as the initial lease liability, cost of the right-of-use asset, depreciation, and lease liability at year-end.

    Original Description:

    INTERMEDIATE ACCOUNTING 2

    Original Title

    Audprob answer 9 and 10

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    The document provides information about two companies, Ramirez Company and East Company, that have entered into lease agreements. It includes details of the lease terms and asks multiple choice questions to calculate financial values related to the initial recognition and ongoing accounting of the leases, such as the initial lease liability, cost of the right-of-use asset, depreciation, and lease liability at year-end.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    57 views2 pages

    Audprob Answer 9 and 10

    Uploaded by

    venice cambry
    The document provides information about two companies, Ramirez Company and East Company, that have entered into lease agreements. It includes details of the lease terms and asks multiple choice questions to calculate financial values related to the initial recognition and ongoing accounting of the leases, such as the initial lease liability, cost of the right-of-use asset, depreciation, and lease liability at year-end.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    9.

    At the beginning of the current year, Ramirez Company leased a machinery with the following
    information:

    Annual rental payable at the end of each year 1,000,000


    Residual value guarantee 500,000
    Payment to lessor to obtain a long-term lease 300,000
    Cost of dismantling and restoring the asset as required
    by contract at present value 390,000
    Annual executory cost paid by lessee 50,000
    Lease term 4 years
    Useful life of machinery 8 years
    Implicit interest rate 10%
    Present value of an ordinary annuity of 1 at 10% for 4 periods 3.17
    Present value of 1 at 10% for 4 periods 0.68

    1. What is the initial lease liability?


    a. 3,510,000
    b. 3,170,000
    c. 4,010,000
    d. 4,000,000

    2. What is the cost of right use asset?


    a. 4,200,000
    b. 4,250,000
    c. 3,810,000
    d. 3,900,000

    3. What is the depreciation for current year?


    a. 462,500
    b. 925,000
    c. 850,000
    d. 965,000

    4. What is the lease liability at year-end?


    a. 2,510,000
    b. 3,159,000
    c. 2,861,000
    d. 3,620,000

    10. At the beginning of current year, East Company sold an equipment with remaining life of 10
    years and immediately leased it back for 4 years at the prevailing market rental.
    Sale price at fair value 6,000,000
    Carrying amount of equipment 4,500,000
    Annual rental payable at the end of each year 800,000
    Implicit interest rate 10%
    Present value of an ordinary annuity of 1 at 10% for
    Four periods 3.17

    1. What is the initial lease liability?


    a. 2,536,000
    b. 3,200,000
    c. 3,000,000
    d. 0

    2. What is the cost of right of use asset?


    a. 1,902,000
    b. 2,598,000
    c. 2,536,000
    d. 0

    3. What is the gain on right transferred to the buyer-lessor?


    a. 866,000
    b. 634,000
    c. 750,000
    d. 0

    4. What is the annual depreciation of the right of use asset?


    a. 475,500
    b. 190,200
    c. 634,000
    d. 253,600

    5. What is the net annual rental income of the buyer-lessor?


    a. 800,000
    b. 200,000
    c. 600,000
    d. 400,000

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