“Lease it or Buy it?”
- Assume you are the controller of a company with operations throughout North America and the company is considering the acquisition of an aircraft for use by executives. You convince the executive team it is more cost efficient to enter into a long term lease of the aircraft instead of borrowing the money to purchase the aircraft. The team wants to understand the impact of the lease on the financial statements. Describe the accounting for the lease and the financial statement presentation of the lease.
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| Brief Exercise 16-08 |
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Pharoah Corporation has the following long-term investments. (1) Common stock of Eidman Co. (10% ownership), cost $102,500, fair value $109,500. (2) Common stock of Pickerill Inc. (30% ownership), cost $202,500, equity $252,500. (3) Debt investment, cost $92,500, fair value $152,500.
Prepare the investments section of the balance sheet.
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| Exercise 16-03 (Video) |
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Pharoah Company purchased 70 Rinehart Company 9%, 10-year, $1,690 bonds on January 1, 2020, for $118,300. The bonds pay interest annually on January 1. On January 1, 2021, after receipt of interest, Pharoah Company sold 40 of the bonds for $65,065.
Prepare the journal entries to record the transactions described above. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
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| Exercise 16-10 a-b (Part Level Submission) (Video) |
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At December 31, 2020, the trading securities for Sunland, Inc. are as follows.
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Cost
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Fair Value
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$17,800 |
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$16,300 |
| B |
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12,900 |
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14,400 |
| C |
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23,300 |
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18,700 |
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$54,000 |
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$49,400 |
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Heidebrecht Design acquired 20% of the outstanding common stock of Cullumber Company on January 1, 2020, by paying $712,500 for the 47,500 shares. Cullumber declared and paid $0.50 per share cash dividends on March 15, June 15, September 15, and December 15, 2020. Cullumber reported net income of $354,500 for the year. At December 31, 2020, the market price of Cullumber common stock was $25 per share.
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Prepare the journal entries for Heidebrecht Design for 2020 assuming Heidebrecht Design cannot exercise significant influence over Cullumber. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)
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