Question & Answer

Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2014. Terms of the lease require payments of $33,000 each January 1, starting January 1, 2014. Cleveland will pay insurance, taxes, and maintenance charges on the crane, which has an estimated life of 12 years, a fair value of $240,000, and a cost to Cleveland of $240,000. The estimated fair value of the crane is expected to be $45,000 at the end of the lease term. No bargain-purchase or renewal options are included in the contract. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is reasonably certain, and no uncertainties exist relative to unreimbursable lessor costs. Abriendo’s incremental borrowing rate is 10%,and Cleveland’s implicit interest rate of 9% is known to Abriendo. Instructions (a) Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor. (b) Prepare all the entries related to the lease contract and leased asset for the year 2014 for the lessee and lessor, assuming the following amounts. (1) Insurance $500. (2) Taxes $2,000. (3) Maintenance $650. (4) Straight-line depreciation and salvage value $15,000. (c) Discuss what should be presented in the balance sheet, the income statement, and the related notes of both the lessee and the lessor at December 31, 2014.

Mishima, Inc. indicated in a recent annual report that approximately $19 million of merchandise was received on consignment. Should Mishima, Inc. report this amount on its balance sheet? Explain.

What was the Committee on Accounting Procedure, andwhat were its accomplishments and failings?

Although the workpiece in a wire drawing operation is obviously subjected to tensile stresses, how do compressive stresses also play a role in the process?

Julia Baker died, leaving to her husband Brent an insurance policy contract that provides that the beneficiary (Brent) can choose any one of the following four options. (a  $55,000 immediate cash. (b  $4,000 every 3 months payable at the end of each quarter for 5 years. (c) $18,00  immediate cash and $1,800 every 3 months for 10 years, payable at the beginning of each 3-month period. (d) $4,000 every 3 months for 3 years and $1,500 each quarter for the following 25 quarters, all paymentspayable at the end of each quarter. Instructions If money is worth 2½% per quarter, compounded quarterly, which option would you recommend that Brent exercise?

What are the two basic categories of cutting tools in machining? Give two examples of machining operations that use each of the tooling types

John and Tara Smith are married and have lived in the same home for over 20 years.John’s uncle Tim, who is 64 years old, has lived with the Smiths since March of this year. Tim is searching for employment but has been unable to find any—his gross income for the year is $2,000.Tim used all $2,000 toward his own support.The Smiths provided the rest of Tim’s support by providing him with lodging valued at $5,000 and food valued at $2,200. a. Are the Smiths able to claim a dependency exemption for Tim?