Question

Multiple Choice Question 52

On December 1, 2018, Cullumber Corporation leased office space for 10 years at a monthly rental of $92000. On that date Cullumber paid the landlord the following amounts:

Rent deposit	$92000
First month's rent	92000
Last month's rent	92000
Installation of new walls and offices	736800
	$1012800

The entire amount of $1012800 was charged to rent expense in 2018. What amount should Cullumber have charged to expense for the year ended December 31, 2018?

$190140

$92000

$736800

$98140

Multiple Choice Question 53

On January 1, 2018, Crane Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Crane to make annual payments of $200000 at the end of each year for 10 years with the title passing to Crane at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Crane uses the straight-line method of depreciation for all of its fixed assets. Crane accordingly accounted for this lease transaction as a capital lease. The lease payments were determined to have a present value of $1682000 at an effective interest rate of 8%. With respect to this capitalized lease, Crane should record for 2018

interest expense of $112133 and depreciation expense of $98800.

interest expense of $118560 and depreciation expense of $168200.

lease expense of $210000.

interest expense of $134560 and depreciation expense of $112133.

Multiple Choice Question 87

On January 2, 2018, Blossom Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $158000 each, payable beginning January 2, 2018. Brick Co. agrees to guarantee the $98000 residual value of the asset at the end of the lease term. Brick’s incremental borrowing rate is 10%, however it knows that Blossom’s implicit interest rate is 8%. What journal entry would Brick Co. make at January 1, 2019 to record the second lease payment?

	PV Annuity Due	PV Ordinary Annuity	PV Single Sum
8%, 5 periods	4.31213	3.99271	0.68058
10%, 5 periods	4.16987	3.79079	0.62092

Lease Liability 111267 Interest Payable 46733         Cash 158000

Lease Liability 110799 Interest Payable 47201         Cash 158000

Lease Liability 158000         Cash 158000

Lease Liability 98999 Interest Payable 59001         Cash 158000

Answer 1

Amount charged to rent Expense account = 92,000 + (736,800/10)*(1/12) = 92,000 + 6,140 = 98,140 Option D is the answer
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