Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 5, Problem 7.1E
To determine
Introduction: Consolidation is a process in which financial statements of a subsidiary is merged with financial statements of the parent. In this process, the effect of intercompany transactions is eliminated.
To record: The
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Maris Co. purchased a machine on January 1, 2018, for P2,500,000 for the express purpose of leasing it. The machine is expected to have a five-year life, no salvage value, and be depreciated on a straight-line monthly basis. On April 1, 2018, under a cancellable lease, Maris leased the machine to Dunbar Company for P750,000 a year for a four-year period ending March 31, 2022. Maris incurred total maintenance and other related costs under the provisions of the lease of P25,000 relating to the year ended December 31, 2018. Harley paid P750,000 to Maris on April 1, 2018. Assuming an operating lease, what should be the income before income taxes derived by Maris Co. from this lease for the year ended December 31, 2018?
Maris Co. purchased a machine on January 1, 2020, for $2,500,000 for the express purpose of leasing it. The machine is expected to have a five-year life, no salvage value, and be depreciated on a straight-line monthly basis. On April 1, 2020, under a cancelable lease, Maris leased the machine to Dunbar Company for $750,000 a year for a four-year period ending March 31, 2024. Maris incurred total maintenance and other related costs under the provisions of the lease of $25,000 relating to the year ended December 31, 2020. Harley paid $750,000 to Maris on April 1, 2020.
Instructions [Assume the operating method is appropriate for parts (a) and (b).]
(a) Under the operating method, what should be the income before income taxes derived by Maris Co. from this lease for the year ended December 31, 2020?
(b) What should be the amount of rent expense incurred by Dunbar from this lease for the year ended December 31, 2020?
Grande Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2015. The machine has an estimated 5-year life and will be straight-line depreciated with no salvage value. The machine was then leased to Sunshine Engineering Company, an 80%-owned subsidiary, under a 5-year operating lease for $15,000 per year, payable each January.1. Record the 2015 entries for the purchase of the machine and the lease to Sunshine Engineering Company on the books of GrandeMachinery Company.2. Record the 2015 entries for the transaction on the books of Sunshine Engineering Company.3. Provide the elimination entries that would be made on the 2015 consolidated worksheet.
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
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