PROBLEM 1

SOLUTION 1
ANNUAL RENTALS 1,440,000
EXECUTORY COSTS -49,410
MINIMUM LEASE PAYMENTS 1,390,590
MULTIPLY BY: PVAA 6.33
PV OF MINIMUM LEASE PAYMENT 8,802,435
THE AMOUNT TO BE CAPITALIZED AS THE COST 8,800,000
OF RIGHT OF USE OF ASSET

SOLUTION 2 & 3
AMORTIZATION TABLE
DATE ANNUAL PAYMENT
12/31/2020
12/31/2020 1,390,590
12/31/2021 1,390,590
12/31/2022 1,390,590

SOLUTION 4
FAIR VALUE OF THE PROPERTY 8,800,000
DIVIDED BY: LEASE YEAR 10
DEPRECIATION 880,000

SOLUTION 5
DEPRECIATION EXPENSE 880,000
INTEREST EXPENSE 889,129
EXECUTORY COST 49,410
TOTAL LEASE-RELATED EXP. 1,818,539

PROBLEM 2
SOLUTION 6
JULY 1 , 2020 TO JUNE 30, 2021 60,000
JULY 1 , 2021 TO JUNE 30, 2022 90,000
JULY 1, 2022 TO JUNE 30, 2023 210,000
TOTAL 360,000
DIVIDE BY: LEASE YEAR 3
RENT EXPENSE PER YEAR 120000
LESS: PAYMENT FOR 1ST YEAR 60,000
ACCRUED RENT PAYABLE, JUNE 30,2021 60,000

SOLUTION 7
PERIODIC PAYMENT 400,000
MULTIPLY BY: PVAA OF 14% FOR 10 PERIOD 5.95
PV OF PERIODIC PAYMENT 2380000
FV OF LEASED ASSET 2,380,000
AMORTIZATION TABLE FOR 2ND LEASE
DATE ANNUAL PAYMENT
JUNE 30,2021
JUNE 30,2021 400,000
JUNE 30,2022 400,000

SOLUTION 8
FIRST LEASE 60,000
SECOND LEASE 122,800
CURRENT LIABILITIES FOR JUNE 30,2021 182,800

SOLUTION 9
RENT EXPENSE (1ST LEASE) 120000
INTEREST EXPENSE 277200
DEPRECIATION EXPENSE (2,380,000/10) 238,000
TOTAL LEASE-RELATED EXPENSE 635200

PROBLEM 3
SOLUTION 10
PRESENT VALUE OF PERIODIC PAYMENT:
PERIODIC PAYMENT (140,000-20,000) 120,000
MULTIPLY BY: PVAA OF 11% FOR 4YRS. 3.44
ADD: PRESENT VALUE OF RESIDUAL VALUE:
RESIDUAL VALUE 30,000
MULTIPLY BY: PV OF 1 OF 11% FOR 4YRS. 0.66
PV OF ANNUAL PAYMENT
ADD: INITIAL DIRECT COSTS
COST OF THE MACHINERY

SOLUTION 11
AMORTIZATION TABLE
DATE ANNUAL PAYMENT
12/31/2020
12/31/2020 120,000
12/31/2021 120,000
12/31/2022 120,000
12/31/2023 120,000
12/31/2024 30,000

INTEREST EXPENSE 34386

EXECUTORY COST 20,000
DEPRECIATION (452,600-30,000)/4 105,650
TOTAL LEASE RELATED EXPENSE 160036

SOLUTION 12
85,614 AMORT. TABLE
SOULTION 13
226,986 AMORT. TABLE
SOLUTION 14
GUARANTEED RESIDUAL VALUE 30,000
LESS: FAIR VALUE OF THE MACHINERY 25,000
LOSS ON FINANCE LEASE 5,000

SOLUTION 15
GUARANTEED RESIDUAL VALUE 30,000
LESS: FAIR VALUE OF THE MACHINERY 40,000
GAIN ON FINANCE LEASE -10,000
LOSS ON FINANCE LEASE 0

SOLUTION 16
COST OF LEASED ASSET 452,600
LESS: ACCUM. DEPRECIATION CARRYING AMOUNT 211300
CARRYING AMOUNT 241,300
ADD: CASH PAYMENT 200,000
TOTAL CONSIDERATION 441,300
LESS: LEASE LIABILITY 226,986
COST OF EQUIPMENT PURCHASED 214,314

PROBLEM 4
SOLUTION 17
COST 3,234,000
DIVIDE BY: PVAA OF 8% FOR 5 YRS. 4.312
ANNUAL PAYMENT 750,000
Multiply by: LEASE TERM 5
PRESENT VALUE OF ANNUAL PAYMENT 3,750,000
LESS: COST OF EQUIPMENT 3,234,000
TOTAL INTEREST TO BE EARNED 516,000

SOLUTION 18
COST OF EQUIPMENT 3,234,000
LESS: ANNUAL PAYMENT 750,000
CARRYING AMOUNT 2,484,000
MULTIPLY BY: INTEREST RATE 8%
INTEREST REVENUE 198,720

SOLUTION 19
LEASE RECEIVABLE:
TOTAL RENT PAYABLE (959,500 X 8) 7,676,000
ADD: UNGUARANTEED RESIDUAL VALUE 400,000
PRESENT VALUE OF THE LEASE:
PRESENT VALUE OF LEASE PAYMENT
(959,500 X 5.56) 5,334,820
 UNGUARANTEED RESIDUAL VALUE
(400,000 X 0.40) 160,000
TOTAL INTEREST OVER THE LEASE TERM

SOLUTION 20
COST OF EQUIPMENT 5,500,000
LESS: ANNUAL PAYMENT 959,500
CARRYING AMOUNT 4,540,500
MULTIPLY BY: INTEREST RATE 12%
INTEREST REVENUE 544,860

PROBLEM 5
SOLUTION 21
LEASE RECEIVABLE:
TOTAL RENT PAYABLE (3,000,000 X 5) 15,000,000
ADD: UNGUARANTEED RESIDUAL VALUE 1,000,000
PRESENT VALUE OF THE LEASE:
PRESENT VALUE OF LEASE PAYMENT
(3,000,000 X 3.60) 10,800,000
UNGUARANTEED RESIDUAL VALUE
(1,000,000 X 0.57) 570,000
TOTAL FINANCIAL REVENUE ON THE 1ST LEASE

SOLUTION 22
PRESENT VALUE OF THE LEASE PAYMENT 11,370,000
LESS: COST OF MACHINERY 8,000,000
INITIAL DIRECT COST 300,000
PROFIT ON SALE 3,070,000

SOLUTION 23
PRESENT VALUE OF THE LEASE PAYMENT 11,370,000
MULTIPLY BY: INTEREST RATE 12%
FINANCIAL REVENUE FOR 2021 1,364,400

SOLUTION 24
SELLING PRICE 7,040,000
BOOK VALUE OF EQUIPMENT 5,600,000
PROFIT ON SALE 1,440,000

SOLUTION 25
SELLING PRICE 7,040,000
MULTIPLY BY: INTEREST RATE 10%
INTEREST EARNED FOR THE YEAR 2021 704000
MULTIPLY BY: COVERED PERIOD ONLY (6/12) 0.5
INTEREST EARNED FOR THE YEAR 2021 352000
 PROBLEM 6
SOLUTION 26
TAXABLE INCOME 4,800,000
MULTIPLY BY: TAX RATE 30%
CURRENT TAX EXPENSE 1440000

SOLUTION 27
TAXABLE INCOME 4,800,000
MULTIPLY BY: TAX RATE 30%
INCOME TAX EXPENSE 1440000

SOLUTION 28
INCOME TAX EXPENSE 1440000
LESS: TAX PAYMENT 500,000
INCOME TAX PAYABLE 940,000

PROBLEM 7
SOLUTION 29
TAXABLE INCOME 7,000,000
MULTIPLY BY: TAX RATE 30%
CURRENT TAX EXPENSE 2100000

SOLUTION 30
ACCOUNTING INCOME 6,000,000
MULTIPLY BY: TAX RATE 30%
INCOME TAX EXPENSE 1800000

SOLUTION 31
TAXABLE INCOME 7,000,000
MULTIPLY BY: TAX RATE 30%
INCOME TAX PAYABLE 2100000

PROBLEM 8
SOLUTION 32
ACCOUNTING INCOME
ADD: NONDEDUCTIBLE EXPENSES
FINES, SURCHARGES AND PENALTIES DURING
THE PERIOD 70,000
NON-DEDUCTIBLE PREMIUM ON LIFE
INSURANCE OF KEY EMPLOYEES 12,000
TOTAL
LESS: NONTAXABLE REVENUES:
INTEREST INCOME RECEIVED ON
GOVERNMENT SECURITIES SUBJECT TO FINAL
TAX
ACCOUNTING INCOME SUBJECT TO TAX
MULTIPLY BY: TAX RATE
INCOME TAX EXPENSE

SOLUTION 33
ACCOUNTING INCOME SUBJECT TO TAX
ADD/DEDUCT: TEMPORARY DIFF.
ADD: INCREASE IN FUTURE DEDUCTIBLE AMOUNT:
WARRANTY EXPENSE ACCRUED 30,000
RENT RECEIVED IN ADVANCE 16,000
LESS: INCREASE IN FUTURE TAXABLE AMOUNT
EXCESS OF DEPRECIATION 20,000
TAXABLE INCOME
MULTIPLY BY: TAX RATE
CURRENT INCOME TAX EXPENSE

SOLUTION 34
CURRENT INCOME TAX EXPENSE 89400
LESS: INCOME TAX PAYMENT 40,000
INCOME TAX PAYABLE 49,400

SOLUTION 35
INCREASE IN DEFERRED TAX ASSET DURING THE
PERIOD
FUTURE DEDUCTIBLE AMOUNT 46,000
MULTIPLY BY: TAX RATE 30%
LESS: INCREASE IN DEFERRED TAX LIABILITY
DURING THE PERIOD
FUTURE TAXABLE AMOUNT 20,000
MULTIPLY BY: TAX RATE 30%
DEFERRED TAX ASSET

SOLUTION 36
BEG. BAL. OF TAXABLE TEMPORARY DIFF. 18,000
MULTIPLY BY: TAX RATE 30%
DEFERRED TAX ASSET, BEG. 5400
ADD: INCREASE IN DTA DURING THE PERIOD 13800
DEFERRED TAX ASSET, ENDING 19200

SOLUTION 37
BEG. BAL. OF DEDUCTIBLE TEMPORARY DIFF. 24,000
MULTIPLY BY: TAX RATE 30%
DEFERRED TAX LIABILITY, BEG. 7200
ADD: INCREASE IN DTL DURING THE PERIOD 6000
DEFERRED TAX LIABILITY, ENDING 13200

PROBLEM 9
SOLUTION 38
 COST
EQUIPMENT 6,000,000
ACCUM. DEPRECIATION 1,800,000
CARRYING AMOUNT 4,200,000
MULTIPLY BY: NET OF TAX RATE
REVALUATION SURPLUS

SOLUTION 39
REVALUATION SURPLUS 1,400,000
MULTIPLY BY: TAX RATE 30%
DEFERRED TAX LIABILITY 420000

SOLUTION 40
ACCOUNTING INCOME BEFORE DEPRECIATION
LESS: DEPRECIATION (5,600,000/7)
ACCOUNTING INCOME SUBJECT TO TAX
ADD: EXCESS OF TAX DEPRECIATION OVER
ACCOUNTING
REVALUATION: 5,600,000/7 800,000
COST: 4,200,000/7 600,000
TAXABLE INCOME
MULTIPLY BY: TAX RATE
CURRENT TAX EXPENSE

SOLUTION 41
COST
EQUIPMENT 6,000,000
ACCUMULATED DEPRECIATION 2,400,000
CARRYING AMOUNT, 2021 3,600,000
MULTIPLY BY: TAX RATE
DEFERRED TAX LIABILITY

SOLUTION 42
ACCOUNTING INCOME SUBJECT TO TAX 3,200,000
MULTIPLY BY: TAX RATE 30%
INCOME TAX EXPENSE 960,000

SOLUTION 43
ACCOUNTING INCOME
LESS: INTEREST INCOME ON GOVERNMENT BONDS
ACCOUNTING INCOME SUBJECT TO TAX
ADD: INCREASE IN FUTURE DEDUCTIBLE AMOUNT:
WARRANTY EXPENSE 1,000,000
LESS: ACTUAL WARRANTY EXPENDITURES 300,000
LESS: DEPRECIATION PER TAX RETURN IN EXCESS
OF PER BOOK
TAXABLE INCOME
MULTIPLY BY: TAX RATE
CURRENT TAX EXPENSE

SOLUTION 44
ACCOUNTING INCOME SUBJECT TO TAX 7,500,000
MULTIPLY BY: TAX RATE 30%
INCOME TAX EXPENSE 2,250,000

SOLUTION 45
CURRENT TAX EXPENSE 2,310,000
INCOME TAX PAYMENT 500,000
INCOME TAX PAYABLE 1,810,000

PROBLEM 11
PER ACCOUNTING
FUTURE TAXABLE AMOUNT
INTEREST INCOME 11,000
RENT EXPENSE 22,800
FUTURE DEDUCTIBLE AMOUNT
LONG SERVICE LEAVE 7,000
DOUBTFUL EXPENSE 4,200
DEPRECIATION 33,000

SOLUTION 46
ACCOUNTING INCOME
ADD: ENTERTAINMENT EXPENSE
ACCOUNTING INCOME SUBJECT TO TAX
ADD/DEDUCT: TEMPORARY DIFFERENCES
LESS: INCREASE IN FUTURE TAXABLE AMOUNT 1,400
OPERATING LOSS CARRY OVER 15,000
ADD: INCREASE IN FUTURE DEDUCTIBLE AMOUNT
TAXABLE INCOME
MULTIPLY BY: TAX RATE
CURRENT TAX EXPENSE

SOLUTION 47
PER ACCOUNTING
FUTURE TAXABLE AMOUNT
INTEREST RECEIVABLE 1,000
PREPAID RENT 2,800
FUTURE DEDUCTIBLE AMOUNT
ACCOUNTS RECEIVABLE 78,000
PLANT 121,000
PROVISION FOR LEAVE 64,000

FUTURE TAXABLE AMOUNT 3,800

MULTIPLY BY: TAX RATE 30%
DEFERRED TAX LIABILITY 1,140

SOLUTION 48
FUTURE DEDUCTIBLE AMOUNT 102,000
MULTIPLY BY: TAX RATE 30%
DEFERRED TAX ASSET 30,600

SOLUTION 49
INCREASE IN DEFERRED TAX LIABILITY DURING
THE PERIOD
DTL, BEG. 720
DTL, END 1,140
INCREASE IN DEFERRED TAX ASSET DURING THE
PERIOD
DTA, BEG 30,360
DTA, END 30,600
DEFERRED TAX EXPENSE

SOLUTION 50
CURRENT TAX EXPENSE 53,760
ADD: DEFERRED TAX EXPENSE 180
INCOME TAX EXPENSE 53,940
 IMMATERIAL
DIFFERENCE

INTEREST EXPENSE AMORTIZATION PRESENT VALUE

8,800,000
0 1,390,590 7,409,410
889129.2 501,461 6,907,949
828953.904 561,636 6,346,313
CURRENT PORTION NON-CURRENT PORTION
INTEREST EXP. AMORTIZATION PRESENT VALUE
2,380,000
0 400,000 1,980,000
277200 122,800 1,857,200

412800

19800
432600
20,000
452,600

INTEREST EXPENSE AMORTIZATION PRESENT VALUE

432600
0 120,000 312,600
34386 85,614 226,986
24,968 95,032 131,954
14,515 105,485 26,469
2,912 27,088 0
8,076,000
 5,494,820
2,581,180

16,000,000

11,370,000
4,630,000
200,000

82,000

-10,000
272,000
 30%
81600

272,000

46,000

-20,000
298,000
30%
89400

13800

6000
7800
REVALUATION APPRECIATION
8,000,000 2,000,000
2,400,000 600,000
5,600,000 1,400,000
70%
980000

4,000,000
800,000
3,200,000

200,000
3,400,000
30%
1,020,000

REVALUATION APPRECIATION
8,000,000 2,000,000
3,200,000 800,000
4,800,000 1,200,000
30%
360,000

9,000,000
1,500,000
7,500,000

700,000

500,000
7,700,000
 30%
2,310,000

PER TAX DIFFERENCE TOTAL

10,000 (11,000-1,000) 1,000

23,200 400 1,400

4,000 (61,000+7,000-64,000) 3,000

2,400 (3,200+4,200-5,000) 1,800
22,000 (220,000/10) 11,000 15,800

175,900
3,900
179,800

-16,400
15,800
179,200
30%
53,760

PER TAX DIFFERENCE TOTAL

0 1,000
0 2,800 3,800

83,000 5,000
154,000 (220,000-(220,000*10%*3)) 33,000
0 64,000 102,000
420

240
180
 FINAL ANSWER
1 8,800,000
2 561,636
3 6,346,313
4 880,000
5 1,818,539
6 60,000
7 2,380,000
8 182,800
9 635,200
10 452,600
11 160,036
12 85,614
13 226,986
14 5,000
15 0
16 214,314
17 516,000
18 198,720
19 2,581,180
20 544,860
21 4,630,000
22 3,070,000
23 1,364,400
24 1,440,000
25 352,000
26 1,440,000
27 1,440,000
28 940,000
29 2,100,000
30 1,800,000
31 2,100,000
32 81,600
33 89,400
34 49,400
35 7,800
36 19,200
37 13,200
38 980,000
39 420,000
40 1,020,000
41 360,000
42 960,000
43 2,310,000
44 2,250,000
45 1,810,000
46 53,760
47 1,140
48 30,600
49 180
50 53,940