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FINAL EXAMINATION
ACCOUNTING 302
FALL 2005
(December 13th ; 10:30am – 12:30pm)
This exam consists of 10 pages, including this cover.
Please put your name at the top of this page and initial the other test pages.
For multiple choice questions, circle the best answer.
Unless indicated otherwise, questions are worth 4 points each.
There are 140 total points for the exam.
Please have a wonderful break and holidays.
Larry
1. DAY Company owns a plot of land on which buried toxic wastes have been discovered. Since it will require several years and a considerable sum of money before the property is fully detoxified and capable of generating revenues, DAY wishes to sell the land now. It has located two potential buyers: Buyer A, who is willing to pay $385,000 for the land now, and Buyer B, who is willing to make 20 annual payments of $60,000 each, with the first payment to be made 5 years from today. Assuming that the appropriate rate of interest is 9%, to whom should DAY sell the land? Show calculations. [6 pts.]
2. On 1/1/2004, DIEP Company issued $10,000,000 of 5%, 5-year bonds with interest payable annually on Dec.31. At time of issue, the market required 6% for similar bonds. Fill in the table below. [12 pts.]
|Date |Proceeds |xxxxxxxxxxxxx |xxxxxxxxxxxxxx | CV of Bond |
|1/1/2004 | |xxxxxxxxxxxxx |xxxxxxxxxxxxxx | |
|xxxxxxxxxxxxxx |Interest payment |Interest Expense |Discount |xxxxxxxxxxxxxx |
| | | |Amortization | |
|12/31/2004 | | | | |
|12/31/2005 | | | | |
|12/31/2006 | | | | |
|12/31/2007 | | | | |
|12/31/2008 | | | | |
|xxxxxxxxxxxxxx |Principal pmt. |xxxxxxxxxxxxxx |xxxxxxxxxxxxxx |xxxxxxxxxxxxxx |
|12/31/2008 | $10,000,000 | | | |
xxxxxxxxxxxxx = cells that are not to be filled in.
3. The general ledger of LAM Corporation as of December 31, 2004, includes the following accounts:
Copyrights $ 40,000
Deposits with advertising agency (will be used to promote goodwill) 27,000
Discount on bonds payable 67,500
Excess of cost over fair value of identifiable net assets of
acquired subsidiary 490,000
Trademarks 90,000
In the preparation of LAM’s balance sheet as of December 31, 2004, what should be reported as total intangible assets? [4 pts.]
4. In January 2004, HORI Mining Corporation purchased a mineral mine for $6,300,000 with removable ore estimated by geological surveys at 3,000,000 tons. The property has an estimated value of $600,000 after the ore has been extracted. HORI incurred $1,725,000 of development costs preparing the property for the extraction of ore. During 2004, 340,000 tons were removed and 300,000 tons were sold. For the year ended December 31, 2004, HORI should include what amount of depletion in its cost of goods sold? [4 pts.]
5. Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty
A. should be reported as long-term.
B. should be reported as current.
C. should be reported as part current and part long-term.
D. need not be disclosed.
6. TRAN Co. has a probable loss that can only be reasonably estimated within a range of outcomes. No single amount within the range is a better estimate than any other amount. The loss accrual should be
A. zero.
B. the maximum of the range.
C. the mean of the range.
D. the minimum of the range.
7. On January 3, 2004, KO Corp. owned a machine that had cost $300,000. The accumulated depreciation was $180,000, estimated salvage value was $18,000, and fair market value was $480,000. On January 4, 2004, this machine was irreparably damaged by PHAM Corp. and became worthless. In October 2004, a court awarded damages of $480,000 against PHAM in favor of KO. At December 31, 2004, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of KO’s attorney, PHAM’s appeal will be denied. At December 31, 2004, what amount should KO accrue for this gain contingency?
8. POPA Company estimates its annual warranty expense as 2% of annual net sales. The following data relate to the calendar year 2004: [4 pts.]
Net sales $1,800,000
Warranty liability account
Balance, Dec. 31, 2004 $ 6,000 debit before adjustment
Balance, Dec. 31, 2004 30,000 credit after adjustment
Which one of the following entries was made to record the 2004 estimated warranty expense?
A. Warranty Expense 36,000
Retained Earnings (prior-period adjustment) 6,000
Warranty Liability 30,000
B. Warranty Expense 30,000
Retained Earnings (prior-period adjustment) 6,000
Warranty Liability 36,000
C. Warranty Expense 24,000
Warranty Liability 24,000
D. Warranty Expense 36,000
Warranty Liability ……………………………………...… 36,000
9. KOEHNE Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2004. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having KOEHNE recall all cans of this paint sold in the last six months. The management of KOEHNE estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation?
A. No recognition
B. Note disclosure only
C. Operating expense of $800,000 and liability of $800,000
D. Appropriation of retained earnings of $800,000
10. YU Equipment Company sells computers for $2,000 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2004 (first year of operation), the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $80 for labor. (Assume sales all occur at December 31, 2004.)
In 2005, YU incurred actual warranty costs relative to 2004 computer sales of $10,000 for parts and $24,000 for labor.
Under the expense warranty treatment, give the journal entries to reflect the above transactions (accrual method) for 2004 and 2005. Remember to record the sales. [12 pts.]
Under the cash-basis method, how much Warranty Expense will be recognized for 2004 and 2005? [4 pts.]
11. If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a [4 pts.]
A. debit to Interest Payable.
B. credit to Interest Receivable.
C. credit to Interest Expense.
D. credit to Unearned Interest.
12. The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as
A. an adjustment to the cost basis of the asset obtained by the debt issue.
B. an amount that should be considered a cash adjustment to the cost of any other debt issued over the remaining life of the old debt instrument.
C. an amount received or paid to obtain a new debt instrument and, as such, should be amortized over the life of the new debt.
D. a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption.
13. Which of the following is an example of "off-balance-sheet financing"?
A. Non-consolidated subsidiary.
B. Special purpose entity.
C. Operating leases.
D. All of the above are examples of "off-balance-sheet financing."
E. None of the above are examples of "off-balance-sheet financing."
14. In a troubled debt restructuring in which the debt is continued with modified terms, a gain should be recognized at the date of restructure, but no interest expense should be recognized over the remaining life of the debt, whenever the
A. carrying amount of the pre-restructure debt is less than the total future cash flows.
B. carrying amount of the pre-restructure debt is greater than the total future cash flows.
C. present value of the pre-restructure debt is less than the present value of the future cash flows.
D. present value of the pre-restructure debt is greater than the present value of the future cash flows.
15. On January 1, 1998, ROYBAL Corporation issued $1,800,000 of 10% ten-year bonds at 103. The bonds are callable at the option of ROYBAL at 105. ROYBAL has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective interest method).
On December 31, 2004, when the fair market value of the bonds was 96, ROYBAL repurchased $400,000 (face) of the bonds in the open market at 96. ROYBAL has recorded interest and amortization for 2004. Ignoring income taxes and assuming that the gain is material, ROYBAL should report this reacquisition as (indicate gain or loss of how much): [6 pts.]
16. When the effective interest method is used to amortize bond premium or discount, the periodic amortization will
A. increase if the bonds were issued at a discount.
B. decrease if the bonds were issued at a premium.
C. increase if the bonds were issued at a premium.
D. increase if the bonds were issued at either a discount or a premium.
E. none of the above.
17. If a company invests in bonds and plans to hold them to maturity, what journal entry would they make at the end of the year to reflect the fact that the market price of the bonds has increased by $13,000 over the bond’s book value?
18. What is the definition of Available-for-Sale securities?
19. How does accounting for Trading securities differ from Available-for-Sale securities?
20. When you transfer a security into Held-to-Maturity, what do you do with the unrealized holding gain/loss at the time of transfer?
21. On January 2, 2003, HUANG Capital Corp. purchases 30% (significant influence) of the outstanding common shares of SPARKMAN Manufacturing Company for $100 million. For 2003, SPARKMAN reports net income of $30 million ($2 million of which was an extraordinary loss). SPARKMAN declared and paid dividends of $3 million in 2003. The following information related to SPARKMAN is available:
Net assets at acquisition: Fair value = $300 million
Book value = $285 million
The depreciable assets have an average remaining useful life of 8 years. HUANG uses straight-line to depreciate assets. Assume the difference between BV and FV of net assets is because depreciable assets have a FV in excess of their undepreciated cost. Below give all the journal entries that HUANG should make in the first year (through 12/31/2003) of this investment. [10 pts.]
22. On January 1, 2004, HONG Co. sells machinery to LIAO Corp. at its fair value of $1,440,000 and leases it back. The machinery had a carrying value of $1,260,000 (original cost = $1,800,000), the lease is for 10 years and the implicit rate is 10%. The lease payments of $213,000 start on January 1, 2004. HONG uses straight-line depreciation and there is no residual value.
Below prepare all of HONG’s entries for all of 2004. [16 pts.]
Below prepare all of LIAO’s entries for all of 2004. [10 pts.]
[pic]
Future Value of Ordinary Annuity of 1
Period 5% 6% 8% 9% 10% 11%
1 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
2 2.05000 2.06000 2.08000 2.09000 2.10000 2.11000
3 3.15250 3.18360 3.24640 3.27810 3.31000 3.34210
4 4.31013 4.37462 4.50611 4.57313 4.64100 4.70973
5 5.52563 5.63709 5.86660 5.98471 6.10510 6.22780
6 6.80191 6.97532 7.33592 7.52334 7.71561 7.91286
7 8.14201 8.39384 8.92280 9.20044 9.48717 9.78327
8 9.54911 9.89747 10.63663 11.02847 11.43589 11.85943
9 11.02656 11.49132 12.48756 13.02104 13.57948 14.16397
10 12.57789 13.18079 14.48656 15.19293 15.93743 16.72201
. . . . . . .
20 33.06595 36.78559 45.76196 51.16012 57.27500 64.20283
24 44.50200 50.81558 66.76476 76.78981 88.49733 102.17415
[pic]
Present Value of an Ordinary Annuity of 1
Period 5% 6% 8% 9% 10% 11%
1 0.95238 0.94340 0.92593 0.91743 0.90909 0.90090
2 1.85941 1.83339 1.78326 1.75911 1.73554 1.71252
3 2.72325 2.67301 2.57710 2.53130 2.48685 2.44371
4 3.54595 3.46511 3.31213 3.23972 3.16986 3.10245
5 4.32948 4.21236 3.99271 3.88965 3.79079 3.69590
6 5.07569 4.91732 4.62288 4.48592 4.35526 4.23054
7 5.78637 5.58238 5.20637 5.03295 4.86842 4.71220
8 6.46321 6.20979 5.74664 5.53482 5.33493 4.14612
9 7.10782 6.80169 6.24689 5.99625 5.75902 5.53705
10 7.72173 7.36009 6.71008 6.41766 6.14457 5.88923
.
20 12.46221 11.46992 9.81815 9.12855 8.51356 7.96333
24 13.79864 12.55036 10.52876 9.70661 8.98474 8.34814
(To convert an ordinary annuity to an annuity due, multiply the above factors by 1+r)
[pic]
Present Value of 1 (present value of a single sum)
Period 5% 6% 8% 9% 10% 11%
4 0.82270 0.79209 0.73503 0.70843 0.68301 0.65873
5 0.78353 0.74726 0.68058 0.64993 0.62092 0.59345
.
20 0.37689 0.31180 0.21455 0.17843 0.14864 0.12403
24 0.31007 0.24689 0.15770 0.12641 0.10153 0.08170
1. Dolan Company owns a plot of land on which buried toxic wastes have been discovered. Since it will require several years and a considerable sum of money before the property is fully detoxified and capable of generating revenues, Dolan wishes to sell the land now. It has located two potential buyers: Buyer A, who is willing to pay $385,000 for the land now, and Buyer B, who is willing to make 20 annual payments of $60,000 each, with the first payment to be made 5 years from today. Assuming that the appropriate rate of interest is 9%, to whom should Dolan sell the land? Show calculations. [6 pts.]
Buyer A. The present value of the purchase price is $385,000.
Buyer B. The present value of the purchase price is:
Present value of ordinary annuity of $60,000 for 24 periods at 9% 9.70661
Less present value of ordinary annuity of $60,000 for 4 periods (deferred) at 9% 3.23972
Difference 6.46689
Multiplied by annual payments × $60,000
Present value of payments $388,013
Or PV(60K,9%,20)/[1 + PVF(9%,4)] = 9.12855/ (1.09)^4 = 9.70661/1.411582 = 6.46689
Conclusion: Dolan should sell to Buyer B.
2. On 1/1/2004, DOI Company issued $10,000,000 of 5%, 5-year bonds with interest payable annually on Dec.31. At time of issue, the market required 6% for similar bonds. Fill in the table below. [12 pts.]
|Date |Proceeds |xxxxxxxxxxxxx |xxxxxxxxxxxxxx | CV of Bond |
|1/1/2004 |$9,578,764 |xxxxxxxxxxxxx |xxxxxxxxxxxxxx |$9,578,764 |
|xxxxxxxxxxxxxx |Interest payment |Interest Expense |Discount |xxxxxxxxxxxxxx |
| | | |Amortization | |
|12/31/2004 |$500,000 |574,726 |74,726 |9,653,489 |
|12/31/2005 |$500,000 |579,209 |79,209 |9,732,699 |
|12/31/2006 |$500,000 |583,962 |83,962 |9,816,661 |
|12/31/2007 |$500,000 |589,000 |89,000 |9,905,660 |
|12/31/2008 |$500,000 |594,340 |94,340 |10,000,000 |
|xxxxxxxxxxxxxx |Principal pmt. |xxxxxxxxxxxxxx |xxxxxxxxxxxxxx |xxxxxxxxxxxxxx |
|12/31/2008 | $10,000,000 |0 |0 |-0- |
xxxxxxxxxxxxx = cells that are not to be filled in.
3. The general ledger of CHU Corporation as of December 31, 2004, includes the following accounts:
Copyrights $ 40,000
Deposits with advertising agency (will be used to promote goodwill) 27,000
Discount on bonds payable 67,500
Excess of cost over fair value of identifiable net assets of
acquired subsidiary 490,000
Trademarks 90,000
In the preparation of CHU’s balance sheet as of December 31, 2004, what should be reported as total intangible assets? [4 pts.]
$40 + 490 + 90 = $620,000
4. In January 2004, Kohl Mining Corporation purchased a mineral mine for $6,300,000 with removable ore estimated by geological surveys at 3,000,000 tons. The property has an estimated value of $600,000 after the ore has been extracted. Kohl incurred $1,725,000 of development costs preparing the property for the extraction of ore. During 2004, 340,000 tons were removed and 300,000 tons were sold. For the year ended December 31, 2004, Kohl should include what amount of depletion in its cost of goods sold? [4 pts.]
[($6.3M + 1.725M - .6M) / 3M] * .3M = $742,500
OR pg. 537 says explor. cost usually expensed as incurred, but if substantial & high risk, then capitalize: [($6.3M - .6M) / 3M] * .3M = $570,000
5. Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty
A. should be reported as long-term.
B. should be reported as current.
C. should be reported as part current and part long-term.
D. need not be disclosed.
6. SUH Co. has a probable loss that can only be reasonably estimated within a range of outcomes. No single amount within the range is a better estimate than any other amount. The loss accrual should be
A. zero.
B. the maximum of the range.
C. the mean of the range.
D. the minimum of the range.
7. On January 3, 2004, Acme Corp. owned a machine that had cost $300,000. The accumulated depreciation was $180,000, estimated salvage value was $18,000, and fair market value was $480,000. On January 4, 2004, this machine was irreparably damaged by Reed Corp. and became worthless. In October 2004, a court awarded damages of $480,000 against Reed in favor of Acme. At December 31, 2004, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of Acme’s attorney, Reed’s appeal will be denied. At December 31, 2004, what amount should Acme accrue for this gain contingency?
$0
never accrue a gain contingency—could disclose in FN if probable
8. Moore Company estimates its annual warranty expense as 2% of annual net sales. The following data relate to the calendar year 2004: [4 pts.]
Net sales $1,800,000
Warranty liability account
Balance, Dec. 31, 2004 $ 6,000 debit before adjustment
Balance, Dec. 31, 2004 30,000 credit after adjustment
Which one of the following entries was made to record the 2004 estimated warranty expense?
A. Warranty Expense 36,000
Retained Earnings (prior-period adjustment) 6,000
Warranty Liability 30,000
B. Warranty Expense 30,000
Retained Earnings (prior-period adjustment) 6,000
Warranty Liability 36,000
C. Warranty Expense 24,000
Warranty Liability 24,000
D. Warranty Expense 36,000
Warranty Liability ……………………………………...… 36,000
9. Lopez Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2004. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Lopez recall all cans of this paint sold in the last six months. The management of Lopez estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation?
A. No recognition
B. Note disclosure only
C. Operating expense of $800,000 and liability of $800,000
D. Appropriation of retained earnings of $800,000
10. KAO Equipment Company sells computers for $2,000 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2004 (first year of operation), the company sold 700 computers. Based on past experience, the company has estimated the total 2-year warranty costs as $40 for parts and $80 for labor. (Assume sales all occur at December 31, 2004.)
In 2005, KAO incurred actual warranty costs relative to 2004 computer sales of $10,000 for parts and $24,000 for labor.
Under the expense warranty treatment, give the journal entries to reflect the above transactions (accrual method) for 2004 and 2005. Remember to record the sales. [12 pts.]
2004
Accounts Receivable or (Cash) 1,400,000
Sales 1,400,000
Warranty Expense 84,000
Estimated Liability Under Warranties 84,000
2005
Estimated Liability Under Warranties 34,000
Inventory 10,000
Accrued Payroll 24,000
Under the cash-basis method, how much Warranty Expense will be recognized for 2004 and 2005? [4 pts.]
2004 $0.
2005 $34,000.
11. If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a [4 pts.]
A. debit to Interest Payable.
B. credit to Interest Receivable.
C. credit to Interest Expense.
D. credit to Unearned Interest.
12. The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as
A. an adjustment to the cost basis of the asset obtained by the debt issue.
B. an amount that should be considered a cash adjustment to the cost of any other debt issued over the remaining life of the old debt instrument.
C. an amount received or paid to obtain a new debt instrument and, as such, should be amortized over the life of the new debt.
D. a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption.
13. Which of the following is an example of "off-balance-sheet financing"?
A. Non-consolidated subsidiary.
B. Special purpose entity. Pg. 690
C. Operating leases.
D. All of the above are examples of "off-balance-sheet financing."
E. None of the above is an example of "off-balance-sheet financing."
14. In a troubled debt restructuring in which the debt is continued with modified terms, a gain should be recognized at the date of restructure, but no interest expense should be recognized over the remaining life of the debt, whenever the
A. carrying amount of the pre-restructure debt is less than the total future cash flows.
B. carrying amount of the pre-restructure debt is greater than the total future cash flows.
C. present value of the pre-restructure debt is less than the present value of the future cash flows.
D. present value of the pre-restructure debt is greater than the present value of the future cash flows.
15. On January 1, 1998, Rodriquez Corporation issued $1,800,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Rodriquez at 105. Rodriquez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective interest method).
On December 31, 2004, when the fair market value of the bonds was 96, Rodriquez repurchased $400,000 (face amount) of the bonds in the open market at 96. Rodriquez has recorded interest and amortization for 2004. Ignoring income taxes and assuming that the gain is material, Rodriquez should report this reacquisition as (indicate gain or loss of how much): [6 pts.]
[$1,800,000 × 1.03 – ( 54,000/10 × 7)] × 2/9 = $403,600 (CV of retired bonds)
$403,600 – ($400,000 × .96) = $19,600.
a gain of $19,600.
16. When the effective interest method is used to amortize bond premium or discount, the periodic amortization will
A. increase if the bonds were issued at a discount.
B. decrease if the bonds were issued at a premium.
C. increase if the bonds were issued at a premium.
D. increase if the bonds were issued at either a discount or a premium.
E. none of the above.
17. If a company invests in bonds and plans to hold them to maturity, what journal entry would they make at the end of the year to reflect the fact that the market price of the bonds has increased by $13,000 over the bond’s book value?
None, these are held-to-maturity investments and amortized cost method is used to account for them.
18. What is the definition of Available-for-sale securities?
All investments in debt and equity securities that do not fit the definition of other reporting categories. “Catch-all” category.
19. How does accounting for Trading securities differ from Available-for-sale securities?
Holding gains/losses for trading securities are part of earnings (I/S) while they are reported as a component of shareholder’s equity and do not go to the I/S for AFS.
20. When you transfer a security into held-to-maturity, what do you do with the unrealized holding gain/loss at the time of transfer?
It should be amortized over the remaining time to maturity.
21. On January 2, 2003, LOZAN Capital Corp. purchases 30% (significant influence) of the outstanding common shares of WATNE Manufacturing Company for $100 million. For 2003, WATNE reports net income of $30 million ($2 million of which was an extraordinary loss). WATNE declared and paid dividends of $3 million in 2003. The following information related to WATNE is available:
Net assets at acquisition: Fair value = $300 million
Book value = $285 million
The depreciable assets have an average remaining useful life of 8 years. LOZAN uses straight-line to depreciate assets. Assume the difference between BV and FV of net assets is because depreciable assets have a FV in excess of their undepreciated cost. Below give all the journal entries that LOZAN should make in the first year (through 12/31/2003) of this investment.
[10 pts.]
Investment in equity securities $100,000,000
Cash $100,000,000
(purchase investment)
Investment in equity securities $9,000,000
Investment loss (EO) 600,000
Investment Revenue $9,600,000
(share of income)
Cash $900,000
Investment in equity securities $900,000
(dividends rec. from investment)
FV > BV by $15 M, $15M * 0.30 = $4.5M; $4.5M / 8 = $0.5625 M / year additional depreciation.
12/31/2003:
Investment Revenue $562,500
Investment in Equity Securities $562,500
22. On January 1, 2004, Hayden Co. sells machinery to Colt Corp. at its fair value of $1,440,000 and leases it back. The machinery had a carrying value of $1,260,000 (original purchase price = $1,800,000), the lease is for 10 years and the implicit rate is 10%. The lease payments of $213,000 start on January 1, 2004. Hayden uses straight-line depreciation and there is no residual value.
Below prepare all of Hayden's entries for 2004. [16 pts.]
Hayden Co. (Lessee)
January 1, 2004
Cash $1,440,000
A/D 540,000
Machinery $1,800,000
Unearned Profit on Sale-Leaseback 180,000
Leased Machinery 1,440,000
Lease Liability 1,440,000
Lease Liability 213,000
Cash . 213,000
December 31, 2004
Depreciation Expense 144,000
Accumulated Depreciation—Capital Lease 144,000
Unearned Profit on Sale-Leaseback 18,000
Depreciation Expense 18,000
Interest Expense [10% × ($1,440,000 – $213,000)] 122,700
Interest Payable 122,700
Below prepare all of Colt's entries for 2004. [10 pts.]
Colt Corp. (Lessor)
January 1, 2004
Machinery $1,440,000
Cash $1,440,000
Lease Receivable 1,440,000
Machinery 1,440,000
Cash 213,000
Lease Receivable 213,000
December 31, 2004
Interest Receivable 122,700
Interest Revenue ……………………………………………….. 122,700
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