The terms of the arrangement require the operator to: a. Construct a road-completing construction within two years b. Maintain and operate the road for three years c. Resurface the road at the end of Year 4 d. The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public e. The road is turn-over to the government at the end of Year 5 f. The operators determine that the implied interest rate is 24.42%. g. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Contract Cost 70 Year Stand-alone selling price Construction Services 1 Forecast cost +10% 2 80 Forecast cost +20% Operation Services Road resurfacing 3-5 25 Forecast cost +30% 15 Forecast cost +10% Compute for the profit for year 2.

The terms of the arrangement require the operator to: a. Construct a road-completing construction within two years b. Maintain and operate the road for three years c. Resurface the road at the end of Year 4 d. The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public e. The road is turn-over to the government at the end of Year 5 f. The operators determine that the implied interest rate is 24.42%. g. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Contract Cost 70 Year Stand-alone selling price Construction Services 1 Forecast cost +10% 2 80 Forecast cost +20% Operation Services Road resurfacing 3-5 25 Forecast cost +30% 15 Forecast cost +10% Compute for the profit for year 2.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter9: Acquisitions Of Property

Section: Chapter Questions

Problem 35P

See similar textbooks

Similar questions

Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Stand-alone selling price Forecast cost +10% Forecast cost +20% Forecast cost +30% Forecast cost +10% Year Contract Cost Construction Services 70 2 80 Operation Services Road resurfacing 25 15 35 4. Compute for the carrying amount of intangible asset at the end of year 2.
The terms of the arrangement require the operator to: Construct a road-completing construction within two years Maintain and operate the road for three years Resurface the road at the end of Year 4 The government pays the operator P200 per year in Years 3 to 5 for making the road available to the public The road is turn-over to the government at the end of Year 5 The operators determine that the implied interest rate is 24.42%. The operator finances the arrangement entirely with debt. The debt proceeds are taken as the contract cost are paid. The debt is payable as follows: 75 in each of years 3 and 4 and P40 in year 5. The effective interest rate is 25.77% The operator makes the following estimates: Year Contract Cost Stand-alone selling price Construction Service 1 70 Forecast cost + 10% 2 80 Forecast cost + 20% Operation Services 3-5 25 Forecast cost + 30% Road resurfacing 4 15 Forecast cost + 10% Compute for the profit for…
Bryant leased a land to Jose for a period of 11 years starting January 1, 2012 at an annual rental of P 12,000. Observing the provisions of the contract, Jose constructed a building which shall become the property of Bryant at the expiration of the lease. The construction was completed on January 1, 2015 a cost of P 1,000,000 with an estimated useful life of 20 years. It is also stipulated in the contract that the lessee will pay to the government the P 1,500 annual real property tax on the land starting in 2012. Assuming that on January 1, 2012, Jose paid P 24,000 to Bryant covering the lease contract for two years, how much income is to be reported by Bryant in 2012? P 12,000 P 13,500 P 24,000 P 25,500 How much income is to be reported by Bryant in 2015 under the outright method? P 13,500 P 1,500 P 1,013,500 P 1,000,00 How much income is to be reported by Bryant in 2015 under the spread-out method? P 13,500 P 1,500 P 1,013,500 P 88,500 How much is the deductible…
Two years ago, the rental for the use of equipment and facilities as paid 5 years in advance, with option to renew the rent for another years by payment of P15,000 annually at the start of each year for renewal period. Now, the lessor asks the lessee If it could be possible to prepay the renewed 5 years period. If the lessee will consider the request, what would the fair prepayment to be made to the lessor if interest is now figured at 8%?
Manatee Corporation bought new equipment and agreed to pay for it in five equal annual installments of $10,000 beginning at the end of next year. Assuming that a prevailing interest rate of 10% applies to this contract, how much should Manatee record as the cost of the equipment?
On January 1, 2018, Mr. V leased his vacant lot for period of 12 years to Mr. J at an annual rate of 2,400,000. It was also agreed that Mr. J will pay the following: 4,800,000 representing rental payment for 2018 and 2019 Security deposit of 2,400,000 Annual real property tax of 30,000 The lease contract provides, among others that the lessee will construct a 5-storey building for parking purposes at a cost of 9,500,000. Ownership of the building shall belong to the lessor upon the expiration or termination of the lease contract. The building was completed on July 1, 2020 with an estimated useful life of 15 years. How much can Mr. J claim as deduction in relation to the lease in 2021?
On January 1, 2018, the Montgomery Company agreed to purchase a building by making six payments. The firstthree are to be $25,000 each, and will be paid on December 31, 2018, 2019, and 2020. The last three are to be$40,000 each and will be paid on December 31, 2021, 2022, and 2023. Montgomery borrowed other money at a10% annual rate.Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building onJanuary 1, 2018?2. How much interest expense on this note will Montgomery recognize in 2018?
On January 1, 2020, Pam Company purchased an equipment for P3,000,000 cash for the purpose of leasing it. The machine is expected to have a 10-year life from the date of purchase. On April 1, 2020, the equipment was leased to Ruby Company for a three-year period, at a monthly rental of P40,000 payable at the end of every month. Additionally, Ruby Company paid P120,000 to Pam Company on April 1, 2020 as a lease bonus. Pam Company paid repairs of P20,000 relating to 2020. Compute for the net income of Pam Company from the lease on December 31, 2020. a.60,000b.150,000c.70,000d.0