Hines Company leased a new machine from Ashwood Company on December 31, 20X2, under a lease with the following pertinent information:
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Lease term		8 years
Annual rental payable at the beginning of each lease year		$ 50,000
Useful life of the machine		10 years
Present value of the 8 lease payments  at 12/31/X2		$258,000
Machine reverts to Ashwood at lease expiration date

The machine has a fair value of $280,000 at the inception of the lease.  Hines uses the straight-line method of depreciation.  For the year ended December 31, 20X3, how much depreciation (amortization) should Hines record for the capitalized leased machine?

In a lease that is recorded as a sales-type lease by the lessor, unearned interest

Thermadore  Co. leases an asset costing $106,624 to the Sucker Company on 1/1/20X1 for a four year term with payments of $25,000 due at the end of each year.  Thermadore Co. used an implicit interest rate of 8% in determining the amount of the payment.  The asset has a five year life and a $10,000 residual value with is unguranteed as to the lessee.  The Thermadore Co. incurred initial direct costs of $6,158 in consummating the lease. This lease is a direct financing lease. Due to the accounting treatment required, the initial direct costs reduced the effective interest on the lease to 6%.

How much interest income should Thermadore recognize on this lease for 20X1?

How much of the initial direct costs should Thermadore amortize in the first year of the lease?

Josh Corporation, lessor, leases property to Jill Company, lessee.  Lease payments amount to $15,000 payable at the end of each year  for 5 years.  There is a residual value of $8,000. Josh's  implicit interest rate is 12%.  The property cost Josh $50,000  to manufacture.  The present value of an ordinary annuity of $1  for 5 payments is 3.17 and the present value of $1 for 5 periods  is .683.

Assuming that the residual value is unguaranteed, the cost of goods sold to be recorded  by Josh is:

Assuming that the residual value is unguaranteed, the amount to be recorded as the sales price by Josh is:

Refer to the following lease amortization schedule. The five payments are made annually starting with the inception of the lease. A $2,000 bargain purchase option is exercisable at the end of the five-year lease. Title transfers to the lessee at the end of the lease term. The asset has an expected economic life of eight years.

Payment number	cash payment	effective interest	decrease in lease obligation	lease obligation balance
				34,600
1	8,000	??	??	26,600
2	8,000	2,660	5,340	21,260
3	8,000	2,126	5,874	15,386
4	8,000	1,539	6,461	8.925
5	8,000	??	??	??
6	2,000	182	1.818	0

Refer to the lease table above:  What is the ending balance after payment #5?

Refer to the lease table above: What would be the amount of interest expense recorded with payment #5?

On June 30, 20X2, Lang Co. sold equipment with an estimated useful life of eleven years and immediately leased it back for ten years.  The equipment's carrying amount was $450,000; the sales price was $430,000; and the present value of the lease payments, which is equal to the fair value of the equipment, was $465,000.  In its June 30, 20X2 balance sheet, what amount should Lang report as deferred loss?

Barker Company leased a new machine from Bell Company on July 1, 1993, under a lease with the following pertinent information:

Lease term	10 years
Annual rental payable at the beginning of each lease year	$30,000
Useful life of the machine	12 years
Implicit interest rate	14%
Present value of an annuity of $1 in advance for 10 periods at 14%	5.95
Present value of $1 for 10 periods at 14%	0.27

Barker has the option to purchase the machine on July 1, 2003, by paying $40,000, which approximates the expected fair value of the machine on the option exercise date.  The cost of the machine on Bell's accounting records is $150,000.  On July 1, 1993, Barker should record a capitalized leased asset of