WRITE YOUR FINA
DATE
2020
Jan 1
Dec 31
31
31
31
2021
Jan 1
Dec 31
31
31
2022
Jan 1
Dec 31
31
31
2023
Jan 1
31
WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS B
EAST COMPANY
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
2020
Machinery (350,000 + 10,000) 360,000 Jan 1 Rent expense
Cash 360,000
Cash 60,000 1 Rent deposit
Rent income 60,000
Deferred initial direct cost 6,000 1 Prepaid rent
Cash 6,000
Cash 30,000
Liability for rent deposit 30,000
Cash 15,000
Unearned rent income 15,000
Insurance 5,000 Dec 31 Rent expense
Cash 5,000
Depreciation (360,000/12) 30,000
Accumulated depreciation 30,000
Unearned rent income 5,000
Rent income (15,000/3) 5,000
Amortization of deferred initial direct cost 2,000
Deferred initial direct cost (6,000/3) 2,000
2021
Cash 60,000 Jan 1 Rent expense
Rent income 60,000
1 Cash
1 Deferred initial direct cost
Depreciation (360,000/12) 30,000 Dec 31 Rent expense
Accumulated depreciation 30,000
Unearned rent income 5,000 31 Amortization of deferred initial di
Rent income (15,000/3) 5,000
Amortization of deferred initial direct cost 2,000
Deferred initial direct cost (6,000/3) 2,000
2022
Cash 60,000 Jan 1 Rent expense
Rent income 60,000
1 Cash
1 Deferred initial direct cost
Depreciation (360,000/12) 30,000 Dec 31 Rent expense
Accumulated depreciation 30,000
Unearned rent income 5,000 31 Amortization of deferred initial di
Rent income (15,000/3) 5,000
Amortization of deferred initial direct cost 2,000
Deferred initial direct cost (6,000/3) 2,000
2023
Liability for rent deposit 30,000 Jan 1 Cash
Cash 30,000
Depreciation (360,000/12) 30,000
Accumulated depreciation 30,000
E YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW
WEST COMPANY
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
2020
Rent expense 60,000 Jan 1 No entry
Cash 60,000
Rent deposit 30,000
Cash 30,000
Prepaid rent 15,000
Cash 15,000
Rent expense 5,000 Dec 31 No entry
Prepaid rent 5,000
Rent expense 60,000 2021
Cash 60,000 Jan 1 Rent expense
70,000
Rent income 70,000
Deferred initial direct cost 6,000
Cash 6,000
Rent expense 5,000 Dec 31 No entry
Prepaid rent 5,000
Amortization of deferred initial direct cost 3,000
Deferred initial direct cost (6,000/2) 3,000
2022
Rent expense 60,000 Jan 1 Rent expense
Cash 60,000
70,000
Rent income 70,000
Deferred initial direct cost 6,000
Cash 6,000
Rent expense 5,000 Dec 31 No entry
Prepaid rent 5,000
Amortization of deferred initial direct cost 3,000
Deferred initial direct cost (6,000/2) 3,000
2023
30,000 Jan 1 No entry
Rent deposit 30,000
E YOUR FINAL ANSWERS BELOW
NORTH COMPANY
ACCOUNT TITLE DEBIT CREDIT
No entry
No entry
Rent expense 70,000
Cash 70,000
No entry
Rent expense 70,000
Cash 70,000
No entry
No entry
Requirement 2:
EAST COMPANY (Head Lessor)
2020 2021 2022 2023
Rent income 65,000.00 65,000.00 65,000.00 -
Insurance (5,000.00) - - -
Depreciation (30,000.00) (30,000.00) (30,000.00) -
Amortization (2,000.00) (2,000.00) (2,000.00) -
Net rent income 28,000.00 33,000.00 33,000.00 -
Insurance 5,000.00 - - -
Depreciation 30,000.00 30,000.00 30,000.00 -
Amortization 2,000.00 2,000.00 2,000.00 -
Net rent expense 37,000.00 32,000.00 32,000.00 -
WEST COMPANY (Intermediate Lessor)
2020 2021 2022 2023
Net rent expense 65,000 65,000 65,000 -
Sublease:
2020 2021 2022 2023
Rent income - 70,000.00 70,000.00 -
Amortization - (3,000.00) (3,000.00) -
Net rent income - 67,000.00 67,000.00 -
2020 2021 2022 2023
Net rent expense 3,000 3,000 -
NORTH COMPANY (Lessee)
2020 2021 2022 2023
Net rent expense - 70,000.00 70,000.00 -
Requirement 3:
BALANCE SHEET
East Company (Head Lessor):
2020 2021
Asset
1) Machinery 360,000.00 360,000.00
Less: Accumulated depreciation (30,000.00) (60,000.00)
Carrying amount of Machinery 330,000.00 300,000.00
Add: Deferred initial direct cost 4,000.00 2,000.00
Adjusted carrying amount of machinery 334,000.00 302,000.00
Liability
1) Liability for rent deposit 30,000.00 30,000.00
West Company (Intermediate Lessor):
2020 2021
Asset
1) Prepaid rent 15,000.00 10,000.00
2) Rent deposit 30,000.00 30,000.00
3) Deferred initial direct cost - sublease - 6,000.00
North Company (Lessee):
(no entry)
INCOME STATEMENT
East Company (Head Lessor):
2020 2021
Revenues
1) Rent income 65,000.00 65,000.00
Expenses
1) Insurance 5,000.00 -
2) Depreciation 30,000.00 30,000.00
3) Amortization of deferred initial direct cost 2,000.00 2,000.00
West Company (Intermediate Lessor):
2020 2021
Revenues
1) Rent income - sublease - 70,000.00
Expenses
1) Rent expense - original lease 65,000 65,000
2) Amortization of deferred initial direct cost - 3,000
North Company (Lessee):
2020 2021
Expenses
1) Rent expense - sublease - 70,000.00
2022 2023
360,000.00 360,000.00
(90,000.00) (120,000.00)
270,000.00 240,000.00
- -
270,000.00 240,000.00
30,000.00
2022 2023
5,000.00 -
30,000.00 -
3,000.00 -
2022 2023
65,000.00 -
-
30,000.00
2,000.00
2022 2023
70,000.00 -
65,000
3,000 -
2022 2023
70,000.00 -
WRITE YOUR FINA
DATE
2020
Jan. 1
2021
Jan. 1
2022
Jan. 1
2023
Jan. 1
2024
Jan. 1
WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS B
ADAM COMPANY
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
2020
Cash 100,000 Jan. 1 Rent expense
Rent receivable 40,000
Rent income 140,000
Cash
2021
Cash 100,000 Jan. 1 Rent expense
Rent receivable 40,000
Rent income 140,000
Cash
2022
Cash 140,000 Jan . 1 Rent expense
Rent income 140,000
Cash
2023
Cash 170,000 Jan . 1 Rent expense
Rent income 140,000 Rent payable
Rent receivable 30,000
Cash
2024
Cash 190,000 Jan . 1 Rent expense
Rent income 140,000 Rent payable
Rent receivable 50,000
Cash
E YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW
EVE COMPANY
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
2020
Rent expense 140,000 Jan. 1 Rent expense
Cash 100,000
Rent payable 40,000
150,000
Rent income 150,000
2021
Rent expense 140,000 Jan. 1 Rent expense
Cash 100,000
Rent payable 40,000
150,000
Rent income 150,000
2022
Rent expense 140,000 Jan. 1 Rent expense
Cash 140,000
150,000
Rent income 150,000
2023
Rent expense 140,000 Jan. 1 Rent expense
Rent payable 30,000
Cash 170,000
150,000
Rent income 150,000
2024
Rent expense 140,000 Jan. 1 Rent expense
Rent payable 50,000
Cash 190,000
150,000
Rent income 150,000
E YOUR FINAL ANSWERS BELOW
CAIN COMPANY
ACCOUNT TITLE DEBIT CREDIT
Rent expense 150,000
Cash 150,000
Rent expense 150,000
Cash 150,000
Rent expense 150,000
Cash 150,000
Rent expense 150,000
Cash 150,000
Rent expense 150,000
Cash 150,000
Requirement 2:
ADAM COMPANY
2020 2021 2022 2023
Net rent income 140,000 140,000 140,000 140,000
EVE COMPANY
2020 2021 2022 2023
Rent income 150,000 150,000 150,000 150,000
Less: Rent expense 140,000 140,000 140,000 140,000
Net rent income 10,000 10,000 10,000 10,000
CAIN COMPANY
2020 2021 2022 2023
Net rent expense 150,000 150,000 150,000 150,000
Requirement 3:
2024
140,000 ADAM COMPANY
2020
Asset:
2024 1) Rent Receivable 40,000
150,000
140,000 EVE COMPANY
10,000 2020
Liability:
1) Rent Payable 40,000
2024
150,000 CAIN COMPANY
ADAM COMPANY
2020
Revenues
1) Rent income 140,000
EVE COMPANY
2020
Revenues
1) Rent income - sublease 150,000
Expenses
1) Rent expense - original lease 140,000
CAIN COMPANY
2020
Expenses
1) Rent expense - sublease 140,000
BALANCE SHEET
2021 2022 2023 2024
80,000 80,000 50,000 0
2021 2022 2023 2024
80,000 80,000 50,000 0
(no entry)
INCOME STATEMENT
2021 2022 2023 2024
140,000 140,000 140,000 140,000
2021 2022 2023 2024
150,000 150,000 150,000 150,000
140,000 140,000 140,000 140,000
2021 2022 2023 2024
140,000 140,000 140,000 140,000
WRITE YOUR FINA
DATE
2020
Jan 1
Dec 31
WRITE YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS B
HEAD LESSOR
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
2020
Equipment - IDC 250,000 Jan 1 Right of use asset
Cash 250,000
Lease receivable 7,800,000 1 Lease liability
Equipment 5,250,000
Unearned interest income 2,550,000
Cash 900,000
Lease receivable 900,000
Unearned interest income 522,000 Dec 31 Interest expense
Interest income 522,000
PV - 1/1/20 5,250,000 31 Depreciation
Payment - 1/1/20 900,000
PV - 1/1/20 4,350,000
x Implicit interest rate 12% 31 Cash
Interest income 522,000
E YOUR FINAL ANSWERS BELOW WRITE YOUR FINAL ANSWERS BELOW
INTERMEDIATE LESSOR
ACCOUNT TITLE DEBIT CREDIT DATE ACCOUNT TITLE
2020
Right of use asset 5,007,420 Jan 1
Lease liability 5,007,420
Lease liability 900,000
Cash 900,000
Interest expense 492,890 Dec 31 Rent expense
Accrued interest payable 492,890
Depreciation 625,928
Accumulated depreciation 625,928
1,000,000
Rent income 1,000,000
E YOUR FINAL ANSWERS BELOW
LESSEE
ACCOUNT TITLE DEBIT CREDIT
no entry
Rent expense 1,000,000
Cash 1,000,000
