On february 20 2012 hooke inc purchased a machine for, Ask an Expert

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On February 20, 2012, Hooke Inc., purchased a machine for $1,201,920 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to Sage Company on March 1, 2012, for a 4-year period at a monthly rental of $17,490. There is no provision for the renewal of the lease or purchase of the machine by the lessee at the expiration of the lease term. Hooke paid $28,320 of commissions associated with negotiating the lease in February 2012:

Instructions

(a) What expense should Sage Company record as a result of the facts above for the year ended December 31, 2012?

(b) What income or loss before income taxes should Hooke record as a result of the facts above for the year ended December 31, 2012? (Hint: Amortize commissions over the life of the lease.)

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9988211

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