EXERCISE 18-8
|
(a)
|
2007—
|
$480,000
|
X $2,200,000 =
$660,000
|
|
$1,600,000
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2008—
$2,200,000 (contract price) minus $660,000 (revenue recognized in 2007) = $1,540,000 (revenue recognized in 2008).
(b) All
$2,200,000 of the contract price is recognized as revenue in 2008.
(c) Using the
percentage-of-completion method, the following entries would be made:
Construction in Process............................................ 480,000
Materials, Cash, Payables, etc.......................... 480,000
Accounts Receivable.................................................. 420,000
Billings on Construction in
Process.............. 420,000
Cash............................................................................... 350,000
Accounts Receivable......................................... 350,000
Construction in Process............................................ 180,000*
Construction Expenses............................................. 480,000
Revenue from Long-term
Contracts [from (a)] 660,000
*[$2,200,000 – ($480,000 + $1,120,000)]
X ($480,000 ÷ $1,600,000)
E19-9
2004
Income Tax
Expense........................................................ 32,000
Income
Tax Payable ($80,000 X 40%)..................... 32,000
2005
Income Tax Refund Receivable
......................................
64,000
($160,000
X 40%)
Benefit
Due to Loss Carryback
(Income
Tax Expense) ......................................... 64,000
2006
Income Tax Refund Receivable
...................................... 32,000
Benefit
Due to Loss Carryback
(Income
Tax Expense) ......................................... 32,000
($80,000
X 40%)
2006
Deferred Tax Asset
.......................................................... 120,000
Benefit
Due to Loss Carryforward
(Income
Tax Expense) ......................................... 120,000
[40% X
($380,000 – $80,000)]
2007
Income Tax Expense...........................................................
48,000
Deferred
Tax Asset (40% X $120,000) ....................... 48,000
2008
Income Tax
Expense........................................................... 40,000
Deferred
Tax Asset ($100,000 X 40%) ....................... 40,000
E19-10
(a) Income Tax Refund
Receivable—2001...................... 5,950
($17,000
X 35%)
Income
Tax Refund Receivable—2002...................... 24,000
($48,000
X 50%)
Benefit Due to Loss Carryback .......................... 29,950
Note: An acceptable alternative is to record only one Income
Tax
Refund Receivable account for the amount of $29,950.
Deferred Tax
Asset...................................................... 34,000
Benefit
Due to Loss Carryforward ..................... 34,000
($150,000
– $17,000 – $48,000 = $85,000)
($85,000
X 40% = $34,000)
(b) Operating loss
before income taxes $(150,000)
Income
tax benefit
Benefit
due to loss carryback $29,950
Benefit
due to loss carryforward 34,000 63,950
Net
loss $ (86,050)
(c) Income Tax
Expense................................................... 36,000
Deferred
Tax Asset .............................................. 34,000
Income
Tax Payable ............................................ 2,000
[40% X
($90,000 – $85,000)]
(d) Income before
income taxes $90,000
Income
tax expense
Current
$ 2,000
Deferred
34,000 36,000
Net
income
$54,000
(e) Income Tax Refund
Receivable—2005......................
12,000
($30,000
X 40%)
Income
Tax Refund Receivable—2006...................... 42,000
($105,000
X 40%)
Benefit
Due to Loss Carryback .......................... 54,000
Note: An acceptable alternative is to record only one Income
Tax
Refund Receivable account for the amount of $24,000.
(f) Operating loss
before income taxes
$(60,000)
Income
tax benefit
Benefit
due to loss carryback 54,000
Net
loss $ (6,000)
E 21-2
(a) To Delaney, the lessee, this lease is a capital lease
because the terms
satisfy
the following criteria:
1.
The lease term is greater than 75% of the economic life of the leased
asset; that is, the lease term is 831/3 % (50/60) of the economic life.
2.
The present value of the minimum lease payments is greater than
90% of the fair value of the leased asset; that is, the present value of $8,555
(see below) is 98% of the fair value of the leased asset:
(b) The minimum lease payments in the case of a guaranteed
residual value by the lessee include the guaranteed residual value. The present
value therefore is:
Monthly
payment of $200 for 50 months.......................... $7,840
Residual
value of $1,180 .................................................... 715
Present
value of minimum lease payments..................... $8,555
(c)
Leased Property Under Capital Leases..................... 8,555
Lease
Liability ....................................................... 8,555
(d)
Depreciation Expense ................................................. 147.50
Accumulated
Depreciation—Capital
Leases................................................................
147.50
[($8,555
– $1,180) ÷ 50 months = $147.50]
(e)
Lease Liability .............................................................. 114.45
Interest
Expense (1% X $8,555).................................. 85.55
Cash
....................................................................... 200.00
E21-3
Capitalized amount of the lease:
Yearly
payment $72,000.00
Executory
costs
2,470.51
Minimum
annual lease payment
$69,529.49
Present
value of minimum lease payments
$69,529.49
X 6.32825 = $440,000.00
1/1/08 Leased
Building Under Capital
Leases.............................................
440,000.00
Lease
Liability ............................ 440,000.00
1/1/08 Executory Costs—Property
Taxes...............................................
2,470.51
Lease
Liability.................................... 69,529.49
Cash
............................................ 72,000.00
12/31/08 Depreciation
Expense....................... 44,000.00
Accumulated
Depreciation—
Capital
Leases........................ 44,000.00
($440,000
÷ 10)
12/31/08 Interest
Expense
(See
Schedule 1)............................ 44,456.46
Interest
Payable ......................... 44,456.46
1/1/09 Executory
Costs—Property
Taxes...............................................
2,470.51
Interest
Payable .................................
44,456.46
Lease
Liability.................................... 25,073.03
Cash
............................................
72,000.00
12/31/09 Depreciation
Expense....................... 44,000.00
Accumulated
Depreciation—
Capital
Leases........................ 44,000.00
12/31/09 Interest
Expense................................ 41,447.70
Interest Payable ......................... 41,447.70
Schedule 1 Kimberly-Clark
Corp.
Lease
Amortization Schedule
(Lessee)
|
Date
|
Annual
Payment Less
Executory
Costs
|
Interest (12%)
on Liability
|
Reduction
of Lease
Liability
|
Lease Liability
|
|
1/1/08
1/1/08
1/1/09
1/1/10
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$69,529.49
69,529.49
69,529.49
|
$69,529.40
44,456.46
41,447.70
|
$69,529.49
25,073.03
28,081.79
|
$440,000.00
370,470.51
345,397.48
317,315.69
|
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