ch21_sol

Instructions for the Microsoft Excel Templates by Rex A Schildhouse

Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text.

And information or data which may be required by the solution will be entered in cells with borders to help identify them.

Be advised, the template workbooks and worksheets are not protected.Overtyping any data may remove it.

You should enter your name, date, instructor's name, and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires more than one page.

Each template is set to print with File Name, Page # of # Page(s), the print date, and the print time to assist in assembly of multiple pages.

If more than one page is required by the template, manual page breaks have been set to provide consistent presentation.

All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells.

In general, the yellow highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions.

Where a yellow highlighted cell shows "Date" enter the appropriate date for that step of the challenge. This may be any date format that Microsoft Excel accepts. Some of these formats include "1/1/12", "01/01/12", and "01/01/2012." All of these will return January 01, 2012, in the format set in the template.

Where a yellow highlighted cell shows "Acct Nbr" enter the appropriate account number, provided in the template and in the text for that step of the challenge. This is entry may be a "Look to" formula to another cell where that information has been provided or previously entered.

Where a yellow highlighted cell shows "Account Title" enter the appropriate account title for that step of the challenge. This is a text entry and most of those cells are set for the proper indentation for that step. Frequently the chart of accounts appropriate to the challenge is provided and you can use the "look to" formula to reference the appropriate account title without typing it.

Check with your instructor to see if abbreviated account titles are acceptable. For example "A/R" for Accounts Receivable, "A/P" for Accounts Payable. If your instructor is using a comparison process between workbooks for grading, these abbreviates may not be acceptable.

Where a yellow highlighted cell shows titles such as "Values," "Amounts," or "Quantities" enter the appropriate numerical value for that step of the challenge. The cell is formatted for proper presentation of the entered information. If a dollar sign is appropriate, it should not be entered, Microsoft Excel will place it there through formatting. Commas and significant digits (decimals) are also set through formatting for common presentation. Since the formatting of the templates is not protected by any password, you may change any of the formatting found in the templates to meet your desires.

Where a yellow highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel.

Where a yellow highlighted cell shows "Text" enter the appropriate text for that step of the challenge. This may be a memorandum entry for a journal entry or a lengthy text answer discussing the results of an analysis of a company's financials. These titles can simply be typed over.

Where a yellow highlighted cell shows titles such as "Journal Number" or "Journ #" you should enter the appropriate number provided in the template and in the text for that step of the challenge. In general this will appear in instances such as "Record the following events in General Journal number six."

The print area is defined to fit onto 8 1/2" × 11" sheets in portrait or landscape mode as required. Margins are generally set to no less than 1/2" so most printers can print them without a problem. If you printer cannot accept margins less than 1" you may have to reformat the margins through Page Setup.

The display may have "Freeze Pane" invoked so column titles remain visible during data entry. This can be removed by utilizing the View menu and selecting "Unfreeze Panes" under "Freeze Panes."

When negative values are required, enter them by starting with a minus sign, "-". Negative values may be shown as ($400) or -$400. Negative values in formulas can be created by putting a minus sign in front of the cell reference - "=E10*-E11" will return a negative value if both cells E10 and E11 contain positive values.

Microsoft Office and Microsoft Excel are products of, and copyrighted by,Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-6399

document.xlsx, Exercise 21-3 Solution, of 21, 04/17/2023, 22:19:05

Name: Solution Date:

Instructor: Course:

1. The agreement requires equal rental payments of $90,000 beginning on January 1, 2012.2. The fair value of the building on January 1, 2012, is $550,000

$10,000 Kimberly-Clark depreciates similar buildings on the straight-line method.4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.5. Kimberly-Clark's incremental borrowing rate is 12% per year. The lessor's

implicit rate is not known by Kimberly-Clark.6. The yearly rental payment includes $3,088.14 of executory costs related to taxes on the property.

Instructions:

Capitalized amount of the lease:Yearly payment 90,000.00 Executory costs 3,088.14 Minimum annual lease payment 86,911.86

Present value of minimum lease payments = $549,999.96

Jan 1, 12 Leased Building 550,000.00 Lease Liability 550,000.00

Jan 1, 12 Executory Costs 3,088.14 Lease Liability 86,911.86

Cash 90,000.00

Dec 31, 12 Depreciation Expense ($550,000 / 10 years) 55,000.00 Accumulated Depreciation - Capital Leases 55,000.00

Dec 31, 12 Interest Expense 55,570.58 Interest Payable 55,570.58

(See Schedule 1)Jan 1, 13 Executory Costs - Property Taxes 3,088.14

Interest Payable 55,570.58 Lease Liability 31,341.28

Cash 90,000.00

Dec 31, 13 Depreciation Expense 55,000.00 Accumulated Depreciation - Capital Leases 55,000.00

Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield

Primer on Using Excel in Accounting by Rex A Schildhouse

E21-3 (Lessee Entries, Capital Lease with Executory Costs and Unguaranteed Residual Value) Assume that on January 1, 2012, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Trevino Storage Company. The following information pertains to this lease agreement.

3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of

Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2012 and 2013. Kimberly-Clark’s corporate year end is December 31.



Instructor: Course:Dec 31, 13 Interest Expense 51,809.62

Interest Payable 51,809.62

Schedule 1: KIMBERLY-CLARK CORPORATION (Lessee)Lease Amortization Schedule

Annual Payment Less Executory Costs

DateJan 1, 12 550,000.00 Jan 1, 12 86,911.86 0.00 86,911.86 463,088.14 Jan 1, 13 86,911.86 55,570.58 31,341.28 431,746.86 Jan 1, 14 86,911.86 51,809.62 35,102.24 396,644.62

AnnualPayment

LessExecutory

Costs

Interest (12%)

on Liability

Reductionof

Lease Liability

LeaseLiability

document.xlsx, Exercise 21-3, of 21, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

1. The agreement requires equal rental payments of $90,000 beginning on January 1, 2012.2. The fair value of the building on January 1, 2012, is $550,000

$10,000 Kimberly-Clark depreciates similar buildings on the straight-line method.4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.5. Kimberly-Clark's incremental borrowing rate is 12% per year. The lessor's

implicit rate is not known by Kimberly-Clark.6. The yearly rental payment includes $3,088.14 of executory costs related to taxes on the property.

Instructions:

Capitalized amount of the lease:Yearly payment AmountExecutory costs AmountMinimum annual lease payment Formula

Use the Excel Present Value (=PV) formula to determine the present value.

Jan 1, 12 Account Title AmountAccount Title Amount


Account Title Amount

Dec 31, 12 Account Title AmountAccount Title Amount


Jan 1, 13 Account Title AmountAccount Title AmountAccount Title Amount





E21-3 (Lessee Entries, Capital Lease with Executory Costs and Unguaranteed Residual Value) Assume that on January 1, 2012, Kimberly-Clark Corp. signs a 10-year noncancelable lease agreement to lease a storage building from Trevino Storage Company. The following information pertains to this lease agreement.

3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of

Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2012 and 2013. Kimberly-Clark’s corporate year end is December 31.


Name: Date:

Instructor: Course:Dec 31, 13 Account Title Amount


Schedule 1: KIMBERLY-CLARK CORPORATION (Lessee)Lease Amortization Schedule

Annual Payment Less Executory Costs

DateJan 1, 12 AmountJan 1, 12 Amount Amount Formula FormulaJan 1, 13 Amount Formula Formula FormulaJan 1, 14 Amount Formula Formula Formula

AnnualPayment

LessExecutory

Costs

Interest (12%)

on Liability

Reductionof

Lease Liability

LeaseLiability



Instructor: Course:

machine to Romero Corporation on January 1, 2012. The lease is for an 8 -year period and requires equal annual payments of $38,514 at the beginning of each year. The first payment is received on January 1, 2012. Wadkins had purchased the machine during 2011 for

$170,000 Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Wadkins. Wadkins set the annual rental to ensure an 11% rate of return. The machine has an economic life of

10 years with no residual value and reverts to Wadkins at the termination of the lease.

Instructions:

The present value of the lease receivable is = $220,000

Jan 1, 12 Lease Receivable 220,000 Cost of Goods Sold 170,000

Sales Revenue 220,000 Inventory 170,000

Jan 1, 12 Cash 38,514 Lease Receivable 38,514

Dec 31, 12 Interest Receivable 19,963 Interest Revenue [($220,000 – $38,514) × 11.00%] 19,963



E21-6 (Lessor Entries, Sales-Type Lease) Wadkins Company, a machinery dealer, leased a

(a) Compute the amount of the lease receivable. (Use the Excel Present Value formula "=PV(" to solve.)

(b) Prepare all necessary journal entries for Wadkins for 2012.


Name: Date:

Instructor: Course:

machine to Romero Corporation on January 1, 2012. The lease is for an 8 -year period and requires equal annual payments of $38,514 at the beginning of each year. The first payment is received on January 1, 2012. Wadkins had purchased the machine during 2011 for

$170,000 Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Wadkins. Wadkins set the annual rental to ensure an 11% rate of return. The machine has an economic life of

10 years with no residual value and reverts to Wadkins at the termination of the lease.

Instructions:

Use this area to enter the Present Value formula


Account Title AmountAccount Title Amount





E21-6 (Lessor Entries, Sales-Type Lease) Wadkins Company, a machinery dealer, leased a

(a) Compute the amount of the lease receivable. (Use the Excel Present Value formula "=PV(" to solve.)

(b) Prepare all necessary journal entries for Wadkins for 2012.

document.xlsx, Problem 21-4 Solution, of 21, 04/17/2023, 22:19:05


Instructor: Course:

Inception date: October 1, 2012Lease term: 6 yearsEconomic life of lease equipment: 6 yearsFair value of asset at October 1, 2012: $300,383 Residual value at end of lease term: 0Lessor's implicit rate: 10%Lessee's incremental borrowing rate: 10%

$62,700

responsibility for all executory costs, which amount to $5,500 per year, and are paid each

Date:10/01/12 300,383 10/01/12 62,700 62,700 237,683 10/01/13 62,700 23,768 38,932 198,751 10/01/14 62,700 19,875 42,825 155,926 10/01/15 62,700 15,593 47,107 108,819 10/01/16 62,700 10,882 51,818 57,001 10/01/17 62,700 5,699* 57,001 0

376,200 70,118 300,383 *Rounding error is $1.



P21-4 (Balance Sheet and Income Statement Disclosure—Lessee) The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.

Annual lease payment due at the beginning of each year, beginning with October 1, 2012:

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes

October 1, beginning October 1, 2012. (This $5,500 is not included in the rental payment of $62,700.) The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment.

The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a capital lease by the lessee and as a direct-finance lease by the lessor.

Annual lease Payment / Receipt:

Interest (10%) on Unpaid Liabililty /

Receivable:

Reduction of Lease Liability /

Receivable:

Balance of Lease Liability /

Receivable:

Instructions: (Round to whole dollars.)(a) Assuming the lessee's accounting period ends on September 30, answer the following questions with respect to this lease agreement:



Instructor: Course:

Interest expense (See amortization schedule) $23,768 Lease executory expense $5,500 Depreciation expense ($300,383 ÷ 6) $50,064

Current liabilities:Lease liability $38,932 Interest payable $23,768

Long-term liabilities:Lease liability $198,751

Property, plant, and equipment:Leased equipment $300,383 Accumulated depreciation ($50,064)

Interest expense (See amortization schedule) $19,875 Lease executory expense $5,500 Depreciation expense ($300,383 ÷ 6) $50,064




Interest expense [$23,768 × (3/12)] $5,942 Lease executory expense [$5,500 × (3/12)] $1,375

$12,516

(1) What items and amounts will appear on the lessee's income statement for the year ending September 30, 2013?

(2) What items and amounts will appear on the lessee's balance sheet at September 30, 2013?



(b) Assuming the lessee's accounting period ends on December 31, answer the following questions with respect to this lease agreement:

(1) What items and amounts will appear on the lessee's income statement for the year ending December 31, 2012?

Depreciation expense (Note that cells G91 and G92 show explanations for the partial year computation.)



Instructor: Course:




Current assets:Prepaid lease executory costs [$5,500 × (9/12)] $4,125

Interest expense [($23,768 - $5,942) + ($19,875 × (3/12))] $22,795 Lease executory expense $5,500 Depreciation expense ($300,383 ÷ 6) $50,064

Current liabilities:Lease liability $42,825 Interest expense [$19,875 × (3/12)] $4,969


Property, plant, and equipment:Leased computer under capital lease $300,383 Accumulated depreciation ($12,516 + $50,064) ($62,580)

Current assets:Prepaid lease executory costs [$5,500 × (9/12)] $4,125

(2) What items and amounts will appear on the lessee's balance sheet at December 31, 2012?



document.xlsx, Problem 21-4, of 21, 04/17/2023, 22:19:05

Name: Date:

Instructor: Course:

Inception date:Lease term:Economic life of lease equipment:Fair value of asset at October 1, 2012:Residual value at end of lease term:Lessor's implicit rate:Lessee's incremental borrowing rate:


Date:10/01/12 300,383 10/01/12 62,700 62,700 237,683 10/01/13 62,700 23,768 38,932 198,751 10/01/14 62,700 19,875 42,825 155,926 10/01/15 62,700 15,593 47,107 108,819 10/01/16 62,700 10,882 51,818 57,001 10/01/17 62,700 5,699* 57,001 0

376,200 70,118 300,383 *Rounding error is $1.



P21-4 (Balance Sheet and Income Statement Disclosure—Lessee) The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.






Interest (10%) on Unpaid Liabililty /

Receivable:

Reduction of Lease Liability /

Receivable:

Balance of Lease Liability /

Receivable:

Instructions: (Round to whole dollars.)(a) Assuming the lessee's accounting period ends on September 30, answer the following questions with respect to this lease agreement:


Name: Date:

Instructor: Course:

Account Title AmountAccount Title AmountAccount Title Amount

TitleAccount Title AmountAccount Title Amount

TitleAccount Title Amount


Account Title AmountAccount Title AmountAccount Title Amount




Account Title AmountAccount Title AmountAccount Title

Amount





(b) Assuming the lessee's accounting period ends on December 31, answer the following questions with respect to this lease agreement:



Name: Date:

Instructor: Course:Account TitleAmount





Account TitleAccount TitleAccount Title









October 1, 20126 years6 years

$300,383 0

10%10%

$62,700

per year, and are paid each

The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties

October 1, beginning October 1, 2012. (This $5,500 is not included in the rental payment of $62,700.) The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all

The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a capital lease by the lessee and as a

Assuming the lessee's accounting period ends on September 30, answer the following questions


What items and amounts will appear on the lessee's income statement for the year ending

What items and amounts will appear on the lessee's balance sheet at September 30, 2013?


What items and amounts will appear on the lessee's balance sheet at September 30, 2014?

Assuming the lessee's accounting period ends on December 31, answer the following questions



AmountAmountAmount

What items and amounts will appear on the lessee's balance sheet at December 31, 2012?


What items and amounts will appear on the lessee's balance sheet at December 31, 2013?



Instructor: Course:


$62,700


Date:

10/01/12 300,383.00 10/01/12 62,700.00 62,700.00 237,683.00 10/01/13 62,700.00 23,768.30 38,931.70 198,751.30 10/01/14 62,700.00 19,875.13 42,824.87 155,926.43 10/01/15 62,700.00 15,592.64 47,107.36 108,819.07 10/01/16 62,700.00 10,881.91 51,818.09 57,000.98 10/01/17 62,700.00 5,699.02 57,000.98 0.00

376,200.00 75,817.00 300,383.00

Interest revenue $23,768



P21-5 (Balance Sheet and Income Statement Disclosure—Lessor) The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.






Interest (10%) on Unpaid Liability /

Receivable:

Reduction of Lease Liability / Receivable:

Balance of Lease Liability / Receivable:

Instructions: (Round to whole dollars.)(a) Assuming the lessor's accounting period ends on September 30, answer the following questions with respect to this lease agreement:

(1) What items and amounts will appear on the lessor's income statement for the year ending September 30, 2013?



Instructor: Course:

Current assets:Lease receivable $38,932 Interest receivable $23,768

Noncurrent assets:Lease receivable (net investment) $198,751

Interest revenue $19,875

Current assets:Lease receivable $42,825 Interest receivable $19,875

Noncurrent assets:Lease receivable (net investment) $155,926

Interest revenue [$23,768 × (3/12)] $5,942

Current assets:Lease receivable $38,932 Interest receivable $5,942 $44,874

Noncurrent assets:Lease receivable $198,751

Interest revenue [($23,768 - $5,942) + ($19,875 × (3/12))] $22,795

Current assets:Lease receivable $42,825 Interest receivable $4,969 $47,794

Noncurrent assets:Lease receivable $155,926

(2) What items and amounts will appear on the lessor's balance sheet at September 30, 2013?



(b) Assuming the lessor's accounting period ends on December 31, answer the following questions with respect to this lease agreement:

(1) What items and amounts will appear on the lessor's income statement for the year ending December 31, 2012?

(2) What items and amounts will appear on the lessor's balance sheet at December 31, 2012?




Name: Date:

Instructor: Course:


$62,700


Date:

10/01/12 300,383.00 10/01/12 62,700.00 62,700.00 237,683.00 10/01/13 62,700.00 23,768.30 38,931.70 198,751.30 10/01/14 62,700.00 19,875.13 42,824.87 155,926.43 10/01/15 62,700.00 15,592.64 47,107.36 108,819.07 10/01/16 62,700.00 10,881.91 51,818.09 57,000.98 10/01/17 62,700.00 5,699.02 57,000.98 0.00

376,200.00 75,817.00 300,383.00




P21-5 (Balance Sheet and Income Statement Disclosure—Lessor) The following facts pertain to a noncancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system.






Interest (10%) on Unpaid Liability /

Receivable:

Reduction of Lease Liability / Receivable:

Balance of Lease Liability / Receivable:

Instructions: (Round to whole dollars.)(a) Assuming the lessor's accounting period ends on September 30, answer the following questions with respect to this lease agreement:



Name: Date:

Instructor: Course:







TitleAccount Title AmountAccount Title Amount Formula



TitleAccount Title AmountAccount Title Amount Formula





(b) Assuming the lessor's accounting period ends on December 31, answer the following questions with respect to this lease agreement:





ch21_sol

Documents

Transcript of ch21_sol