Subject: Business / Accounting
QuestionQuestion1On December 31, 2017, Toby’s Ice Cream Farm entered into a lease agreement for new milking machineswith annual payments of $47,000 for 4 years with the first payment due immediately. The milking machines are is expected have a useful life of six years and have an ordinary selling price of $300,000. The lessor expects a return of 6.5% on this type of lease, which approximates Toby’s marginal borrowing rate. On January 1, 2019, the lease is renegotiated to be extended by three years and lease payments increase to $60,000 per year, effective immediately. The total expected useful life of the machines is now expected to be seven years. Record the journal entries required for this lease from lease inception through to adjusting entries required at the end of 2019.question 2On August 1, 2015, Schumpeter Conglomerates sold 5,000,000 15-year bonds with a coupon rate of 5% paid semi-annually. The market rate for a security of similar risk and maturity is 4%. Schumpeter Conglomerates hired Ivanov’s Finance Shack to issue the securities at a cost of $1,500,000. Attached to each $125,000 bond are seven detachable warrants allowing for the purchase of 50 shares of no-par common stock for $15 per share. Each warrant is estimated to have a market value of $75. Record journal entries for the issuance of the bond, the first two interest payments, and any required adjusting entries for the fiscal year ending December 31, 2015.