SHOW COMPLETE SOLUTIONS AND ANSWERS On January 1, 2020, Gold Company entered into a 5-yearlease of a floor of a building with the following terms:Annual rental for the first two years payableat the end of each yearAnnual rental for the next three years payableat the end of each yearInitial direct cost paid by lesseeLeasehold improvementPresent value of restoration cost required by contractUseful life of buildingImplicit interest rateDiscount rate for the restoration cost200,000300,000100,000250,00050,00020 years8%5%1.7832.577PV of an ordinary annuity of 1 at 8% for two periodsPV of an ordinary annuity of 1 at 8% for three periodsPV of 1 at 8% for two periods0.857Required:1 Compute the lease liability on January 1, 2020.2. Compute the cost of right of use asset.3. Compute the depreciation for 2020.4. Prepare a table of amortization.5. Prepare journal entries for 2020.6. Prepare the journal entry for the lease payment onDecember 31, 2022.

On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at the end ofeach Annual rental for the next three years payable at the end of each year Initial direct cost paid by lessee Leasehold improvement Present value of restoration cost required by contract Useful life of building Implicit interest rate Discount rate for the restoration cost PV of an ordinary annuity of 1 at 8% for two periods PV of an ordinary annuity of 1 at 8% for three periods PV of 1 at 8% for two periods 200,000 year 300,000 100,000 250,000 50,000 20 years 8% 5% 1.783 2.577 0.857 Required: 1 Compute the lease liability on January 1, 2020. 2. Compute the cost of right of use asset. 3. Compute the depreciation for 2020.

On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at the end ofeach Annual rental for the next three years payable at the end of each year Initial direct cost paid by lessee Leasehold improvement Present value of restoration cost required by contract Useful life of building Implicit interest rate Discount rate for the restoration cost PV of an ordinary annuity of 1 at 8% for two periods PV of an ordinary annuity of 1 at 8% for three periods PV of 1 at 8% for two periods 200,000 year 300,000 100,000 250,000 50,000 20 years 8% 5% 1.783 2.577 0.857 Required: 1 Compute the lease liability on January 1, 2020. 2. Compute the cost of right of use asset. 3. Compute the depreciation for 2020.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 8P: At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the...

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During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.
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