Doug Nelson Co. leased a building to Patrick Wise Inc: Account for an Operating Lease
Not what you're looking for?
On January 1, 2008, Doug Nelson Co. leased a building to Patrick Wise Inc. The relevant information related to the lease is as follows.
1. The lease arrangement is for 10 years.
2. The leased building cost $4,500,000 and was purchased for cash on January 1, 2008.
3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years.
4. Lease payments are $275,000 per year and are made at the end of the year.
5. Property tax expense of $85,000 and insurance expense of $10,000 on the building were incurred by Nelson in the first year. Payments on these two items was made at the end of the year.
6. Both the lessor and the lessee are on a calendar-year basis.
INSTRUCTIONS
A) Prepare the journal entries that Nelson Co. should make in 2008.
B) Prepare the journal entries that Wise Inc. should make in 2008.
Purchase this Solution
Solution Summary
This solution provides the journal entries for Nelson Co. and Wise Inc.
Solution Preview
ANSWERS
Instruction A
January 1, 2008
DR: Building 4,500,000
CR: Cash ...
Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Operations Management
This quiz tests a student's knowledge about Operations Management
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.