4-20.

(Honest Company)
(a)
2013

July 1 Cash 540,000

Accumulated depreciation 350,000
Equipment 800,000
Gain on sale leaseback 90,000
July 1 Rent expense 80,000
Cash 80,000
Dec. 31 Prepaid rent 40,000
Rent expense 40,000 (b)
2013

July 1 Cash 540,000

Accumulated depreciation 350,000
Equipment 800,000
Gain on sale leaseback 50,000
Unearned profit on sale leaseback 40,000
1 Rent expense 80,000
Cash 80,000
Dec. 31 Prepaid rent 40,000
Rent expense 40,000
31 Unearned profit on sale leaseback 5,000
Profit on sale leaseback 5,000
(40,000/4) x 6/12
(c)
2013

July 1 Cash 400,000

Accumulated depreciation 350,000
Loss on sale leaseback 50,000
Equipment 800,000
1 Rent expense 80,000
Cash 80,000
Dec. 31 Prepaid rent 40,000
Rent expense 40,000
(d)
2013

July 1 Cash 350,000

Accumulated depreciation 350,000
Deferred loss on sale leaseback 100,000
Equipment 800,000
1 Rent expense 80,000
Cash 80,000
Dec. 31 Prepaid rent 40,000
Rent expense 40,000
31 Rent expense/Loss on sale leaseback 12,500
Deferred loss on sale leaseback 12,500
5-10.

(Jude Company)
(a)
Future taxable amount
Carrying amount of inventories > Tax Base
P
100,000
Carrying amount of building & equipment > Tax Base
1,800,000
P 1,900,000
Future Deductible Amount
Carrying amount of accounts receivable < Tax Base
P
200,000

Carrying amount of warranty > Tax Base

800,000
Carrying amount of unearned rent > Tax Base
(b)

(c)

Income tax payable (5,000,000 X 30%)

Deferred tax assets (1,500,000 x 30%)
Deferred tax liability (1,900,000 x 30%)
Income tax expense-Current
Income tax payable
Income tax expense-Deferred
Deferred tax asset
450,000 525,000
Deferred tax liability
Income tax benefit-Deferred
1,400,000 570,000

500,000
P 1,500,000

P1,500,000
P 450,000
570,000

1,500,000
1,500,000
75,000
75,000
830,000
830,000