1. On January 1, 2013, Eugene Inc. entered into a capital lease to acquire the u

Question

1. On January 1, 2013, Eugene Inc. entered into a capital lease to acquire the use of a computer for 5 years. The present value of the lease payments is $42,500, the applicable interest rate is 10 percent, and payments of $12,000 are due at the end of each year. The entry to record the first $12,000 payment on December 31, 2013 will include a debit to Lease Liability for $ _______________

2. The following information pertains to Whitfield, Inc., during 2014:

      Production output.......            24,000 units

      Sales ……                               17,000 units

      Direct materials costs......... $68,000

      Direct labor costs......             3,700 hours at $11 per hour

      Factory overhead........          $4 per unit plus $87,000 per year

      Selling expenses........            $0.75 per unit sold plus $90,000 per year

A]Cost of goods sold in 2014 = $ ________________

B] Total period costs that will appear on the 2014 income statement = $ ______________

Explanation / Answer

Present value of lease payment = 42500

Yearly lease payment = 12000

Amount of lease Liability would be debited at the payment of first installment= 42500*10% = 4250 amount of interest

Payment = 12000 Lease liability = 12000- 4250 = 7750

7750 would be debited as lease liability

2-

Direct Material cost per unit 68000 24000 2.833333333 48166.66667 Direct labor cost 3700 24000 0.154166667 28829.16667 factory overhead per unit 17000 4 68000 68000 cost of goods sold 144995.8333 Total period cost selling expenses 17000 0.75 90000 102750

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