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Chapter 15 Intermediate Accounting Hw

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1. Exercise 15-1 Operating lease [LO4] On January 1, 2011, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers from ComputerWorld Corporation under a two-year operating lease agreement. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by Computer World at a cost of $90,000 and were expected to have a useful life of six years with no residual value. | Required: | Prepare the appropriate entries for both (a) the lessee and (b) the lessor from the inception of the lease through the end of 2011. (Use straight-line depreciation.) (Omit the "$" sign in your response.) | Date | General Journal | Debit | credit | (a) Nath-Langstrom Services, Inc. (Lessee) | | | June 30, 2011 | Rent expense | | | | Cash | | | | | | | Dec. 31, 2011 | Rent expense | | | | Cash | | | | | | | (b) Computer World Corporation (Lessor) | June 30, 2011 | Cash | | | | Rent revenue | | | | | | | Dec.31, 2011 | Cash | | | | Rent revenue | | | | | | | | Depreciation expense | | | | Accumulated depreciation | | | |

rev: 11_23_2011

Explanation: (b) Computer World Corporation (Lessor): | December 31,2011 | Depreciation expense ($90,000 ÷ 6 years) = 15,000 |

2. Exercise 15-7 Capital lease [LO5] American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2011. The lease agreement for the $4 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four

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