Purchased a Machine on January 1, 2015, for $1,500,000 for the Express

question 14

Essay

purchased a machine on January 1, 2015, for $1,500,000 for the express purpose of leasing it. The machine is expected to have a five-year life, no salvage value, and be depreciated on a straight-line monthly basis. On April 1, 2015, under a cancelable lease, Maris leased the machine to Dunbar Company for $450,000 a year for a four-year period ending March 31, 2019. Maris incurred total maintenance and other related costs under the provisions of the lease of $15,000 relating to the year ended December 31, 2015. Harley paid $450,000 to Maris on April 1, 2015.
Instructions [Assume the operating method is appropriate for parts
(a) and (b).]
(a) Under the operating method, what should be the income before income taxes derived by Maris Co. from this lease for the year ended December 31, 2015?
(b) What should be the amount of rent expense incurred by Dunbar from this lease for the year ended December 31, 2015?

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Definitions:

Egalitarian

A belief or doctrine that emphasizes equality, especially regarding moral, political, social, and economic rights for all humans.

Sensitivity

The quality of being easily influenced, changed, or affected by external conditions or stimuli.

Authoritative Parenting

A parenting style characterized by high responsiveness and high demands, where parents set clear standards, are assertive but not intrusive or restrictive.

Gender Awareness

The recognition and understanding of the differences between genders and the societal roles attributed to each gender, often developed in early childhood.