Bush Corporation signed a lease for equipment from EZ Leasing Company on January 1 20X2, for a period of ten years at $40,000 per year, including insurance of $3,000 and taxes of $2,000 per year. The equipment had a useful life of fifteen years. At the end of the lease, Bush will have the option of buying the equipment outright for a dollar. Bush's incremental borrowing rate is 8%, and the rate implicit in the lease (which is known to Bush) is 6%. Lease payments are due every year on December 31. The present value of an annuity for various terms and rates are as follows:
10 years 7.360 6.710
15 years 9.712 8.559
On its financial statements for the year ended June 30, 20X2, Bush will display the following:
Discount rate 6%
Lease payment 40000
Lease term 10 years
Accumulated equipment, lease depreciation, accrued payable, and interest are determined for Bush Corporation.
Inventory accounting for Bush Company
1.) Clinton, Bush, and Bush Company (CB2) Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2009, the accounting records provided the following information for product
UNITS UNIT COST
Inventory- 4,000 $12
December 31, 2008
Purchase March 25th 8,000 $10
Purchase May 15th 5,000 $15
Sales ($50 each) 10,000
Operating Expenses (Excluding Income Tax) $100,000
a. Prepare a separate income statement through pre-tax income that details cost of goods sold for: 1.) Case A: FIFO; 2.) Case B: LIFO. For each case show the computation of the ending inventory.
b. Compare the pretax income and the ending inventory amounts between the two cases.
c. Which inventory costing method would be preferred for income tax purposes? Why?View Full Posting Details