q 24)

Holtzman Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you.

1.

Holtzman purchased equipment on January 2, 2017, for $83,300. At that time, the equipment had an estimated useful life of 10 years with a $4,900 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,940 residual value.

2.

During 2020, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $294,000. It had a useful life of 10 years and a residual value of $29,400. The following calculations present depreciation on both bases for 2018 and 2019.

		Straight- Line			Double-Declining -Balance
2018		$26,460			$58,800
2019		26,460			47,040

3.

Holtzman purchased a machine on July 1, 2018, at a cost of $117,600. The machine has a residual value of $15,680 and a useful life of 8 years. Holtzmans bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the residual value.

Marin Manufacturing Ltd. has signed a lease agreement with LPN Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: . . The lease is for 5 years commencing January 1, 2020. Marin must pay LPN $58,515 on January 1 of each year, beginning in 2020. Equipment of this type normally has an economic life of 6 years. LPN has concluded, based on its review of Marin's financial statements, that there is no unusual credit risk in this situation. LPN will not incur any further costs with regard to this lease. LPN purchases this equipment directly from the manufacturer at a cost of $217,476, and normally sells the equipment for $271,276. Marin's borrowing rate is 7%. LPN's implied interest rate is 6%, which is known to Marin at the time of negotiating the lease. Marin uses the straight-line method to depreciate similar equipment. Both Marin and LPN have calendar fiscal years (year end December 31), and follow ASPE. . . Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. From Marin Manufacturing's perspective, is this a capital or operating lease? Marin will classify this as a SHOW LIST OF ACCOUNTS operating lease capital lease Prepare a lease amortization schedule for this lease. (Round answers to 0 decimal places, e.g. 5,275.) Date Payment Interest Principal Balance January 1, 2020 January 1, 2020 January 1, 2021 January 1, 2022 January 1, 2023 January 1, 2024 SHOW LIST OF ACCOUNTS Prepare the journal entries on Marin Manufacturing's books on January 1, 2020. (Credit account titles are automatically indented when the am is required, select "No entry" for the account titles and enter 0 for the amounts.) unt is entered. Do not indent manually. If no entr Debit Credit Date Account Titles and Explanation Jan. 1, 2020 (To record inception of lease.)