Accounting 5102 Codification Research System Assignment

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02--Codification-Research-System-Assignment
Accounting 5102
Codification Research System Assignment
Spring 2017
Tranter
This assignment consists of two independent situations that require students to
research Lease Accounting (Topic 842) in the Financial Accounting Standards
Board’s (FASB) Codification.
When answering the questions in the two situations use the rules of Accounting
Standards Update (ASU) No. 2016-02 dated February 2016, which becomes effective
during 2019. Do not use existing lease rules to answer the questions.
In each of the two situations, fully explain your calculations to Winslow’s
management. This is a writing assignment as well as a research assignment. No
credit will be given for calculations that are not fully explained. (This is not just a
homework problem that is typed).

Your assignment must be typed, double-spaced, and presented in a college-level
writing style. Style and grammatical errors will be penalized up to 20 points (see the
grading rubric on moodle).
Papers are due in class on the date indicated in the syllabus. Late papers will be
penalized, and papers will not be accepted via email.
Use the present value tables provided in the assignment whenever present values are
needed.
Winslow records the lease right (right-of-use asset) and lease liability directly on its
balance sheet (rather than use footnote disclosure).
The implicit rate in the leases is not readily determined.
Present Value of $1
Perio
ds
2
%
3
%
4
%
5
%
6
%
8
%
10
%
12
%

1 .9
8
.9
7
.9
6
.9
5
.9
4
.9
3
.91 .89
2 .9
6
.9
4
.9
2
.9
1
.8
9
.8
6
.83 .80
3 .9
4
.9
2
.8
9
.8
6
.8
4
.7
9
.75 .71
4 .9
2
.8
9
.8
5
.8
2
.7
9
.7
4
.68 .64
5 .9
1
.8
6
.8
2
.7
8
.7
5
.6
8
.62 .56
6 .8
9
.8
4
.7
9
.7
5
.7
0
.6
3
.56 .50

8 .8
5
.7
9
.7
3
.6
8
.6
3
.5
4
.47 .40
10 .8
2
.7
4
.6
8
.6
1
.5
6
.4
6
.38 .32
16 .7
2
.6
2
.5
3
.4
6
.3
9
.2
9
.21 .16
20 .6
7
.5
5
.4
5
.3
8
.3
1
.2
1
.15 .10
Present Value of Annuity of $1

Perio
ds
2% 3% 4% 5% 6% 8
%
10
%
12
%
1 .98 .97 .96 .95 .94 .9
3
.9
1
.8
9
2 1.9
4
1.9
1
1.8
8
1.8
6
1.8
3
1.
79
1.
74
1.
69
3 2.8
8
2.8
3
2.7
7
2.7
2
2.6
7
2.
58
2.
49
2.
40
4 3.8
0
3.7
2
3.6
2
3.5
4
3.4
6
3.
32
3.
17
3.
04
5 4.7
1
4.5
8
4.4
4
4.3
2
4.2
1
4.
00
3.
80
3.
60

6 5.6
0
5.4
2
5.2
3
5.0
7
4.9
1
4.
63
4.
35
4.
10
8 7.3
3
7.0
2
6.7
3
6.4
6
6.2
1
5.
75
5.
33
4.
96
10 8.9
8
8.5
3
8.1
1
7.7
2
7.3
6
6.
71
6.
14
5.
65
16 13.
57
12.
56
11.
65
10.
84
10.
10
8.
85
7.
82
6.
98
20 16.
35
14.
88
13.
59
12.
46
11.
47
9.
82
8.
51
7.
47
Use the tables provided whenever present values are needed.
Situation 1:

On January 1, 20x1, Winslow signed a lease giving it the right to use a drop forge
owned by Port Angeles for 2,000 hours per year for 8 years.
The lease requires Winslow to pay $20,000 per year on December 31, 20x1-20x4 and
$26,000 per year on December 31, 20x5-20x8.
The drop forge has a life of 20 years and a fair value of $200,000.
Winslow’s incremental rate was 8% on January 1, 20x1, and 10% on January 1, 20x5.
Winslow and Port Angeles modified the lease on January 1, 20x5. Under the modified
lease terms Winslow will pay Port Angeles $15,000 per year on December 31,
20x5-20x8 to use the drop forge for 1,200 hours per year.
1. Prepare the entry needed by Winslow to record the lease modification on
January 1, 20x5.
Situation 2:
On January 1, 20x1,Winslow leased equipment from Queen Anne. The ten-year lease
requires Winslow to pay Queen Anne $12,000 annually on December 31, 20x1-20x10.
Winslow’s incremental borrowing rate was 8% on January 1, 20x1, and 6% on
December 31, 20x2, (January 1, 20x3).
On January 1, 20x1, Winslow incurred the following costs related to the lease of the
equipment:

Accounting 5102 Codification Research System Assignment

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Accounting 5102 Codification Research System Assignment