Maris Co. purchased a machine for cash on January 1, 2015, for $1,500,000 for th
ID: 2480036 • Letter: M
Question
Maris Co. purchased a machine for cash on January 1, 2015, for $1,500,000 for the express purpose of leasing it. The machine is expected to have a five-year life, no salvage value, and be depreciated on a straight-line monthly basis. On January 1, 2015, under a cancelable lease, Maris leased the machine to Dunbar Company for $450,000 a year for a four-year period ending December 31, 2018. Maris incurred total maintenance and other related costs under the provisions of the lease of $15,000 relating to the year ended December 31, 2015. Harley paid $450,000 to Maris on January 1, 2015.
Instructions [Assume the operating method is appropriate for parts (a) and (b).]
(a) Prepare all of Maris’ journal entries for January 1, 2015 and December 31, 2015.
(b) Prepare all of Dunbar’s journal entries for January 1, 2015 and December 31, 2015.
Explanation / Answer
1(a) Depreciation as per staright Line Method $ Asset cost 1,500,000 Residual Value 0 Depreication per year = (1500000-0)/5 = $ 300000 Journal Entries in the books of Maris Co. Debit Credit $ $ 01-Jan-15 Machinery A/c 1,500,000 To Bank 1,500,000 (Purchase of Machinery) 01-Jan-15 Bank A/c 450,000 To Lease rent received 450,000 (being amount of lease rent for the year received) 31-Dec-15 Maint. Machinery A/c 15,000 To Expenes Payable 15,000 (Being amount of Machinery maint. Provision made for the year) 31-Dec-15 Depreciation A/c 300,000 To Accumulated Depreciation A/c 300,000 (being amount of Dep. For the year provided) Journal Entries in the books of Dunbar 01-Jan-15 Lease Rent A/c 450,000 To Bank A/c 450,000 (being amount of lease rent for the year paid)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.