EXERCISE 20-1

(A.) Computation of pension expense

Service cost $ 60,000
Interest expense ($500,000 X 10%) $ 50,000
Interest revenue $ (15,000)
Pension expense for 2022 $ 95,000

Pension Expense $ 95,000

Cash $ 90,000
Pension Asset /Liability $ 5,000
EXERCISES 20.4

Boudreau plc
Pension Worksheet-2022
General Journal Entries

Annual Pension Pension Asset

Items Cash
Expense /Liability

Balance, January 1, 2022 -

(a.) Service cost £ 40,000 Dr
(b.) Interest expense 39,200 Dr
(c.) Interest revenue 39,200 Cr
(d.) Contributions 25,000 Cr
(e.) Benefits

Journal entry, December 31 £ 40,000 Dr £ 25,000 Cr £ 15,000 Cr

Balance, December 31, 2022 £ 15,000 Cr

*£ 40,000 - £ 25,000 = £ 15,000

*£ 535,800 - £ 520,800 = £ 15,000
 Memo Record

Defined Benefit
Plan Assets
Obligation

£ 490,000 Cr £ 490,000 Dr
40,000 Cr
39,200 Cr
39,200 Dr
25,000 Dr
33,400 Dr 33,400 Cr

£ 535,800 Cr £ 520,800 Dr
EXERCISE 20-14

(A.) Computation of pension expense:

Service cost $80,000
Interest expense ($700,000 X 10%) $70,000
Interest revenue ($675,000 X 10%) ($67,500)
Pension expense for 2022 $82,500

*$700,000 – $25,000 = $ 675,000

Pension Expense $82,500

Pension Asset /Liability $32,500
Cash $50,000

(B.) Income Statement:

Pension expense $82,500

Statement of Financial Position:

Liabilities
Pension liability. $57,500

*$25,000 + $32,500

WORKSHEET:
General Journal Entries

Annual Pension Pension Asset

Entries Expense Cash /Liability

Balance, January 1, 2022 $ 25,000 Cr

(a.) Service cost $ 80,000 Dr
(b.) Interest expense 70,000 Dr
(c.) Interest revenue 67,500 Cr
(d.) Contributions $ 50,000 Cr
(e.) Benefits

Journal entry for 2022 $ 82,500 Dr $ 50,000 Cr $ 32,500 Cr

Balance, December 31, 2022 $ 57,500 Cr

*$ 700,000 - $ 25,000 = $ 675,000

*$ 675,000 x 10%= $ 67,500
 Memo Record
Defined
Benefit Plan Assets
Obligation
$ 700,000 Cr $ 675,000 Dr
80,000 Cr
70,000 Cr
67,500 Dr
50,000 Dr
35,000 Dr 35,000 Cr

$ 815,000 Cr $ 757,500 Dr
EXERCISES E20.15

Postretirement Benefit Worksheet-2022

General Journal Entries
Annual
Postretirement
Postretirement Cash
Asset /Liability
Expense
Balance, January 1, 2022 220,000 Cr
(a.) Service cost 45,000 Dr
(b.) Interest expense 26,400 Dr
(c.) Interest revenue 8,800 Cr
(d.) Contributions 10,000 Cr
(e.) Benefits

Journal entry for 2022 62,600 Dr 10,000 Cr 52,600 Cr

Balance, December 31, 2022 272,600 Cr
*110,000 x 8% = 8,800
*330,000 x 8% = 26,400

JOURNAL:

Postretirement Expense 62,600

Postretirement Asset/Liability 52,600
Cash 10,000
et-2022
Memo Record

Defined Benefit
Plan Assets
Obligation

330,000 Cr 110,000 Dr
45,000 Cr
26,400 Cr
8,800 Dr
10,000 Dr
20,000 Dr 20,000 Cr

381,400 Cr 108,800 Dr
EXERCISES E20.16

Postretirement Benefit Expense is comprised of the following:

Service Cost 45,000
Interest Expense (330,000 x 8%) 26,600
Interest Expense (110,000 x 8%) (8,800)
Postretirement Expense 2022 62,600
EXERCISES 21.1
The lease term is 100% of the asset’s economic life, and thepresent value of the rental payments are 100% of the
asset’s fair value, as shownbelow:
(A.)
Present value of first payment
(£5,552.82 X 0.92593) £ 5,141.52
Present value of second payment
(£5,830.46 X 0.85734) £ 4,998.69
Present value of third payment
(£6,121.98 X .79383) £ 4,859.81

Present value of the rental payments

*Two cents rounding error.

12/31/2021
Right-of-Use Asset £ 15,000
Lease Liability

12/31/2022
Interest Expense (£15,000 X 8%) £ 1,200.00
Lease Liability £ 4,352.82
Cash

Depreciation Expense (£15,000 ÷ 3) £ 5,000.00

Right-of-Use Asset

12/31/2023
Interest Expense
[(£15,000 - £4,352.82) X 8%] £ 851.77
Lease Liability £ 4,978.69
Cash

Depreciation Expense (£15,000 ÷ 3) £ 5,000.00

Right-of-Use Asset

(B.) The initial valuation of the lease liability and related right-of-use asset should not include any unknown increases or
decreases in lease payments due to increases or decreases in the CPI. Rather, for the initial measurement of the lea
liability, the lessee assumes that all payments will be made as if the CPI level at the commencement date of the lea
not change. Thus, DU Journeys should discount the annual lease payments using the ordinary annuity factor applied
first lease payment.
e of the rental payments are 100% of the

CATATAN= 0,92593 Didapat dari 8% untuk tahun pertama dan begitu pula
seterusnya, 8% yang disesuaikan dengan tahunnya

£ 15,000.00

£ 15,000

£ 5,552.82

£ 5,000.00

£ 5,830.46

£ 5,000.00

se asset should not include any unknown increases or

the CPI. Rather, for the initial measurement of the lease
if the CPI level at the commencement date of the lease does
se payments using the ordinary annuity factor applied to the
EXERCISES E21.2

(A.) Computation of present value of lease payments:

$8,668 X 4.54595* = $39,404

*Present value of an annuity-due of 1 for 5 periods at 5%

12/31/2021
(B.) Right-of-Use Asset 39,404
Lease Liability 39,404
Lease Liability 8,668
Cash 8,668

12/31/2022
Depreciation Expense 7,881
Right-of-Use Asset 7,881
($39,404 ÷ 5)
Lease Liability 7,131
Interest Expense 1,537
[($39,404 – $8,668) X 5%]
Cash 8,668
 EXERCISES E21.7

(A.) The lessee accounts for all leases using the finance lease method andrecords the right-of-use asset and
liability at the present value of thelease payments using the incremental borrowing rate if it is impracticable todete
the interest rate implicit in the lease. The lessee’s amortizationdepends on whether ownership transfers to
lessee or if there is abargain purchase option. If one of these conditions is fulfilled, amortizationwould be ov
economic life of the asset. Otherwise, it would beamortized over the lease term. Because both the econom
the asset andthe lease term are three years, the leased asset should be depreciated overthis period.

The lessor should account for the lease as a sales-type lease. Because titleto the asset passes to the lessee, the leas
longer than 75% of theeconomic life of the asset (3/3 = 100%), and the present value of the leasepayments is more
90% of the fair value of the asset (€95,000/€95,000 =100%), it is a finance (sales-type) lease by the lessor. Assuming
collectibilityof the rents is probable, the lease is accounted for as a sales-type lease tothe lessor.

The lessor should record a lease receivable and sales revenue equal to thepresent value of the lease paymen
€95,000. In addition, the lessorshould remove the asset (inventory) from its books at $70,000, and th
cost of goods sold €70,000. Interest is recognized annually at aconstant rate relative to the unrecove
lease receivable (See lease amortization schedule).

Fair value of leased asset

(Amount to be recovered by lessor through lease payments) € 95,000
Three annual lease payments: €95,000 ÷ 2.57710* € 36,863

*Present value of an ordinary annuity of 1 for 3 periods at 8%

(B.) Amortization Schedule

Interest (8%)Revenue
ScheduleRent Receipt/Payment
/Expense

1/1/2019 - -
12/31/2019 € 36,863 €7,600*
12/31/2020 36,863 5,259
12/31/2021 36,863 2,730

(C.) 1/1/2022
Lease Receivable 95,000
Cost of Goods Sold 70,000
Sales Revenue 95,000
Inventory 70,000

(D.) 1/1/2022
 Right-of-Use Asset 95,000
Lease Liability 95,000

(E.) 1/1/2022
Right-of-Use Asset 103,311
Cash 10,000
Lease Liability 93,311
(€36,863 X 2.53130*)
*Present value of an ordinary annuity of 1 for 3 periods at 9%.
ords the right-of-use asset and lease
ate if it is impracticable todetermine
er ownership transfers to the
ed, amortizationwould be over the
erm. Because both the economic life of
overthis period.

t passes to the lessee, the lease term is

of the leasepayments is more than
e) lease by the lessor. Assuming
othe lessor.

value of the lease payments of

s books at $70,000, and therelated
e relative to the unrecovered

Reduction of Principal Receivable /Liability

- € 95,000 *€95,000 X .08 = €7,600

€ 29,263 65,737
31,604 34,133
34,133 0
EXERCISES E20.10

(A.) Computation of lease liability:

¥20,471.94 Annual rental payment
X 4.31213 PV of annuity-due of 1 for n = 5, i = 8%
¥88,277.67 PV of periodic rental payments

¥ 4,000.00 Bargain purchase option

X 0,68058 PV of 1 for n = 5, i = 8%
¥ 2,722.32 PV of bargain-purchase option

¥88,277.67 PV of periodic rental payments

(+) 2722.32 PV of bargain-purchase option
¥91,000.00 Lease liability (rounded)

Choi Group (Lessee)

Lease Amortization Schedule

Date Annual Lease Payment Interest (8%) on Liability

Plus BPO
5/1/2022
5/1/2022 ¥ 20,471.94
5/1/2023 20,471.94 ¥ 5,642.24
5/1/2024 20,471.94 4,455.87
5/1/2025 20,471.94 3,174.58
5/1/2026 20,471.94 1,790.79
4/30/2027 4,000.00 296.22
¥106,359.70 ¥15,359.70
*Rounding error is 8 Yen

(B.) 5/1/2022
Right-of-Use Asset 91,000.00
Lease Liability 91,000.00
Lease Liability 20,471.94
Cash 20,471.94
12/31/2022
Interest Expense 3,761.49
Lease Liability 3,761.49
(¥5,642.24 X 8/12 = ¥3,761.49)
12/31/2022
Depreciation Expense 6,066.67
Right-of-Use Asset 6,066.67
($91,000.00 ÷ 10 =
($9,100.00; $9,100.00 X (8/12 = $6,066.67)
1/1/2023
Lease Liability 3,761.49
Interest Expense 3,761.49
 5/1/2023
Interest Expense 5,642.24
Lease Liability 14,829.70
Cash 20,471.94
12/31/2023
Depreciation Expense 2,970.58
Lease Liability 2,970.58
($4,455.87 X 8/12)
12/31/2023
Depreciation Expense 9,100.00
Right-of-Use Asset 9,100.00
($91,000.00 ÷ 10 years = (9,100.00)

(Note to instructor: Because a bargain-purchase option was involved, theleased asset is depreciated
over its economic life rather than over the leaseterm.)
ssee)
Schedule

Reduction of Lease
Lease Liability
Liability

¥91,000.00
¥20,471.94 70,528.06
14,829.70 55,698.36
16,016.07 39,682.29
17,297.36 22,384.93
18,681.15 3,703.78
3,703.78 0
¥91,000.00
theleased asset is depreciated
EXERCISES 21.12

This is a finance (sales-type) lease to Benson since the lease term is 75% (6 ÷ 8) of the asset’s economic life. In
(A.) addition, although the lease paymentsare not provided in the problem facts, the lease will also meet the pres
test, as shown in part (b). There is a bargain-purchase option in thelease, as Flynn has the option to purchase
asset at the end of the leaseterm for a price $4,000 below the expected residual value of the asset, andthus e
of the option is reasonably certain. Last, collectibility of thelease payments is probable.

(B.) Computation of annual rental payment (by the lessor):

Fair value of leased asset
Less: Present value of bargain-purchase option ($1,000 X 0.74622*) =
PV of lease payments

Six annual lease payments: $149,254 ÷ 5.32948**

*Present value of $1 at 5% for 6 periods
**Present value of an annuity-due at 5% for 6 periods

(C.) 1/1/2022
Lease Receivable $ 150,000*
Cost of Goods Sold 120,000
Sales Revenue
Inventory
*($28,005 X 5.32948) + ($1,000 X .74622), rounded**Sales revenue would also include both the present value
rental payments and the bargain-purchase option.

Cash 28,005
Lease Receivable
12/31/2022
Lease Receivable 6,100
Interest Revenue
[($150,000 – $28,005) X .05]
(D.) If the collectibility of lease payments is not probable for thelessor, the lessor does not derecognize
asset or recognize selling profit onthe lease. Instead, Bensen would recognize any cash receipts as
deposit liability.

1/1/2022
Cash 28,005
Deposit Liability

A lessor does not derecognize the asset and recognize selling profit untilcollectibility becomes pro
(E.) 1/1/2022
Right-of-Use Asset 146,677
Lease Liability
[($28,005 X 5.21236*) +($1,000 X .70496**)]
Lease Liability 28,005
Cash
*Present value of an annuity-due at 6% for 6 periods.
**Present value of $1 at 6% for 6 periods
12/31/22
 Depreciation Expense 18,335
Right-of-Use Asset
($146,677 ÷ 8* years)
*The lessee uses the economic life of an asset instead of thelease term for amortization purposes when
ownershiptransfers or there is a bargain purchase option
Interest Expense 7,120
Lease Liability
($146,677 – $28,005) X 6%
(F.) The value of the lease liability for the lessee is unaffected by any initialdirect costs incurred. However, the in
measurement of the right-of-useasset must be adjusted for initial direct costs incurred. Thus, the
initialright-of-use asset should be measured at $148,677 ($146,677 + $2,000)

Right-of-Use Asset 148,677

Cash
Lease Liability
÷ 8) of the asset’s economic life. In
s, the lease will also meet the presentvalue
s Flynn has the option to purchase the
idual value of the asset, andthus exercise
s is probable.

$150,000
746
$149,254

$28,005

$ 150,000**
120,000
also include both the present values of the

28,005

6,100

or, the lessor does not derecognize the

cognize any cash receipts as a

28,005

ofit untilcollectibility becomes probable.

146,677

28,005
 18,335

or amortization purposes when

7,120

ect costs incurred. However, the initial

ct costs incurred. Thus, the
0)

2,000
146,677