Active TopicsActive Topics  Display List of Forum MembersMemberlist  Search The ForumSearch  HelpHelp
  RegisterRegister  LoginLogin
Subject Topic: JE for sale lease back... (Topic Closed Topic Closed) Post ReplyPost New Topic
Message << Prev Topic | Next Topic >>

Joined: 21 Jun 2009
Location: United States
Online Status: Offline
Posts: 162
Posted: 03 May 2010 at 15:29 | IP Logged leased equipment frpm Howe corp. on July1,2009 for an eight year period expiring june 30,2017.equal payments under the lease are $600,000 and are due on July 1 of each year.The first payment was made on july 1,2009. The rate of interest contemplated by Peg and Howe is 10%.The cash selling price og equipment is $3,520,000 and cost of equipment on Howe's accounting records is 2,800,000.The lease is appropriately recorded as a sales-type lease.what amount of profit on the sale and interest revenue that Howe should record for the year ended December 31,2009?

Answer :

Pft on sale720,000 = Selling price 3,520,000 - Cost 2,800,000

Int Revenue = 146,000

Outstanding Lease R.ble = 2,920,000

3520,000(Mim.Lease Pmt) - 600,000 initial pmt = 2,920,000

2,920,000 x 10% = 292,000 x 6/12 =146,000

My confusion is J E :

Dr. Lease Rble 4,800,000(600,000 *8yrs)

Cr. Sales         & nbsp;      3,520,000

Cr.unearned Interest ..1280,000

Is lease Receivable for 4,800,000 and Unearned Interedt for 1,280,000..I have a feeling thats wrong..Plz help...


Do it.
Back to Top View meghna's Profile Search for other posts by meghna

Joined: 22 Jan 2010
Location: United States
Online Status: Offline
Posts: 117
Posted: 03 May 2010 at 19:14 | IP Logged  

You forgot to Credit the Equipment at its cost: 2,800,000


Debit: Gross Lease Receivable 4,800,000

Credit: Equipment 2,800,000

Credit: Sales 720,000

Credit: Unearned Interest Revenue 1,280,000

In this question, they asked for Interest Revenue just for 12/31/2009.  For 6 months only, therefore, 146,000 is correct. The JE is for entire 8 years. 

Back to Top View mits07's Profile Search for other posts by mits07

Sorry, you can NOT post a reply.
This topic is closed.

  Post ReplyPost New Topic
Printable version Printable version

Forum Jump
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum

Powered by Web Wiz Forums version 7.9
Copyright ©2001-2010 Web Wiz Guide

This page was generated in 0.1250 seconds.

Copyright 1996-2016 CPAnet/MizWeb Communities All Rights Reserved
|Facebook |CPA Exam Club | About | Contact | Newsletter | Advertise & Promote