Operating method of treatment rather than capital method

Assignment Help Financial Accounting
Reference no: EM131296172

Punk Peddler Inc., leases its carts which it uses to sell trinkets. On Jan 1, 2014, the company leased 5 carts and agreed to make lease payments of $20,000 (total for five carts) each year. The lease contract has a term of five years, after which the carts can be purchased by Junk Peddler for a nominal price. Assume an effective rate of 10 percent.

A. Compute the annual rental expense if the lease is treated as an operating lease.

B. Prepare the journal entry on Jan 1, 2014 if the lease is treated as a capital lease. Compute the total expense associated with the lease during the first year if the lease is treated as a capital lease.

C. How can the leases be arranged to treat them as operating method of treatment rather than capital method?

Reference no: EM131296172

Questions Cloud

Ambulatory surgery center owned by a group practice : Gainesville Surgicenter Inc. is a large, ambulatory surgery center owned by a group practice of surgeons in Gainesville, Florida. The 2010 financial statements for the firm are shown below: Balance Sheet as of December 31, 2010 (Thousands of dollars)..
Explain the significance of a high price-earnings ratio : Explain the significance of a high price-earnings ratio. Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You don not need to enter amounts.
Aubrey developed lung cancer and is unable to work. : Aubrey brown is a decorated better if the Vietnam war. As a result of his exposure to agent orange during the war, Aubrey developed lung cancer and is unable to work.
Operating method of treatment rather than capital method : Punk Peddler Inc., leases its carts which it uses to sell trinkets. On Jan 1, 2014, the company leased 5 carts and agreed to make lease payments of $20,000 (total for five carts) each year. Compute the annual rental expense if the lease is treated as..
Estimate of variable consideration and transaction price : Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’ contract specifies that it will receive a flat fee of $54,000 and an additional $24,000 if Bran reaches a prespecified target amou..
Discuss risk associated with being over or under leveraged : f you were a small business owner would you implement an activity-based costing system. What potential benefits or pitfalls do you foresee? Discuss the risk associated with being over or under leveraged.
Cash controls-bank reconciliations and special cash funds : The elements of internal control are very important in business due to the passage of the Sarbanes Oxley Act. Internal controls involve protection of a company’s assets. In this Discussion, you will look at cash controls, bank reconciliations, and sp..
Distinguishing characteristics of variable-fixed : What are the distinguishing characteristics of variable, fixed, and semivariable factory overhead costs? What effect does a change in volume have on total variable, fixed, and semivariable costs?

Reviews

Write a Review

 

Financial Accounting Questions & Answers

  Attorney has indicated that loss is probable

Cameron Inc. is a defendant in a lawsuit. The company’s attorney has indicated that a loss is probable. The amount of loss can be estimated to be within a range of $5 million to $15 million. How should Cameron handle this situation on the books? Prep..

  Determine the relavant costs

The increase in volume will be large enough to require increases in fixed selling expenses and in general administrative overhead, but not in fixed manufacturing overhead.

  Accrual accounting principles are applied

Adjusting Entries are required at the end of the period to ensure that accrual accounting principles are applied. The rent is prepaid for three months at $1,200 per month. Develop the adjusting entry at the end of the first month that rent should be ..

  What is break-even point in number of passenger train cars

How many passenger train cars must Springfield Express operate to earn pre-tax income of $ 120,000 per month on this route? What is the break-even point in number of passenger train cars per month?

  Alpha corporation reported the data

Alpha Corporation reported the  data for its most recent year sales

  Portfolio of trading securities

Newfield Corp. holds a portfolio of trading securities. Suppose that on October 15, Newfield paid $85,000 for an investment in Turok shares to add to its portfolio. At December 31, the market value of Turok shares is $96,000.

  What is the company ending inventory

The following relates to Data Original Company in 2014. What is the company's ending inventory for 2014?

  Activity bases would be the most appropriate for food costs

Which of the following best describes the effect on direct labor when management adopts a just in time environment? Which of the following activity bases would be the most appropriate for food costs of a hospital? Costs that vary in total in direct p..

  Calculate cost of inventory reported on the balance sheet

The total merchandise inventory counted at the end of the year was $65,000. Purchases for $7,000 are in transit under FOB shipping point terms. Calculate the cost of inventory reported on the balance sheet.

  Projected benefit obligation

Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.3% × service years × final year's salary, payable at the end of each year. What is the company's projected benefit obligation at the beginning of 2016 (after ..

  Explain how much goodwill is associated with this investment

Any excess of cost over fair value was attributed to goodwill, which has not been impaired. Rob Co. reported net income of $300,000 for 2011, and paid dividends of $100,000 during that year. Explain how much goodwill is associated with this inves..

  Holding period yield

The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd