intermediate Financial Reporting II

Q. No. 1. Albert Corp., a private corporation that adheres to ASPE, is a manufacturer of truck trailers. On January 1, 2020, Albert leases ten trailers to Einstein Inc. under a six-year non-cancellable lease agreement. The following information about the lease and the trailers is provided: 1. Equal annual payments (due on December 31 each year) will be payable, to provide Albert with an 8% return on their investment. 2. Title to the trailers will pass to Einstein at the end of the lease. 3. At January 1, 2020, the fair value of each trailer is $ 50,000. The cost of each trailer to Albert Corp. is $ 45,000. Each trailer has an expected useful life of nine years. 4. Collectability of the lease payments is reasonably assured, and any unreimbursable costs under the lease that are likely to be incurred by Albert can be reasonably estimated. Instructions a) What type of lease is this for the lessor? Discuss. b) Calculate the annual lease payment. Present value factor for 6 periods at 8% is 4.62288. Round to the nearest dollar. C. Prepare a lease amortization schedule for Albert Corp. for the first three years. d) Prepare the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of the lease rentals, and the recognition of income. Assume the use of a perpetual inventory system and round all amounts to the nearest dollar. Q. No. 2. BIRCH CORPORATION Comparative Statements of Financial Position December 31 2020 2019 $ 43,000 $ 24,000 Accounts receivable, net. 31,000 38,000 Inventory ..... 118,000 82,000 Land...... 120,000 190,000 Building . .. 200,000 200,000 Accumulated depreciation ........ (50,000) (40,000) Equipment ...... 1,030,000 600,000 Accumulated depreciation ....... .. .. .. (118,000) (94.000) $1,374,000 $1,000,000 Accounts payable .. .. .... $ 115,000 $ 100,000 4% Bonds payable........ 320,000 -0- Common shares ..... 750,000 750,000 Retained earnings ....... 189,000 150,000 $1 374.000 $1.000,000 Additional data: 1. Net income for the year was $84,000. 2 . Cash dividends were paid. Land was sold for $80,000. 4. Old equipment was sold for $70,000. This equipment had cost $150,000 and had accumulated depreciation of $60,000 to date of sale. New equipment was purchased to replace it. Instructions Prepare a statement of cash flows for calendar 2020, using the indirect method