nbox (7 x My Apps x Analytic x Gebook (cx Linea M × ws Order H X O My Apps x ASC Pro X M Question X W zto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fconnect.mheducation.com%252Fconnect%252F ect i Saved Help Save & C d ces "I don't see that in my intermediate accounting text I saved from college," you grumble to a colleague in the accounting division of Dowell Chemical Corporation. "This will take some research." Your comments pertain to the appropriate accounting treatment of a proposed sublease of warehouses Dowell has used for product storage. Dowell leased the warehouses one year ago on December 31, 2024. The five-year lease agreement called for Dowell to make quarterly lease payments of $2,398,303, payable each December 31, March 31, June 30, and September 30, with the first payment at the lease's beginning. As a finance lease, Dowell had recorded the right-of-use asset and liability at $40 million, the present value of the lease payments at 8%. Dowell records amortization on a straight-line basis at the end of each fiscal year. Today, Dowell's controller, explained a proposal to sublease the underused warehouses to American Tankers, Incorporated, for the remaining four years of the lease term. American Tankers would be substituted as lessee under the original lease agreement. As the new lessee, it would become the primary obligor under the agreement, and Dowell would not be secondarily liable for fulfilling the obligations under the lease agreement. "Check on how we would need to account for this and get back to me," the controller had said. Required: 1. On December 31, 2025, what is the balance in Dowell's lease liability? 2. On December 31, 2025, what is the carrying amount (after accumulated amortization) of Dowell's leased warehouses? 3. Obtain the relevant authoritative literature on accounting for derecognition of finance leases by lessees using the FASB's Codification Research System. You might gain access from the FASB website (www.fasb.org), from your school library, or some other source. To determine the appropriate accounting treatment for the proposed sublease, what is the specific seven-digit Codification citation (XXX-XX-XX) that Dowell would rely on to determine: a. If the proposal will qualify as a termination of a finance lease? b. The appropriate accounting treatment for the sublease? 4. What, if any, journal entry would Dowell record in connection with the sublease? Complete this question by entering your answers in the tabs below. What, if any, journal entry would Dowell record in connection with the sublease? Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in Req 1 to 3 Req 4 F1 72 F2 Q W A 3 #3 S 800 F3 $ 54 000 OOO F4 < Prev 1 of 3 HH www Next > % d05 חח E R D MacBook Pro 04 F5 F6 F7 66 87 DII FB * 8 T Y U 44 F9 ( この 9 ) J F10 0 F11 af 0 P V G H J K L FL > Z X C リ He command B N M H command My Apps x Analytic x G ebook (c x Linea Mi X Ws Order HiX My App: X ASC Pro X M Question X Help mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fconnect.mheducation.com%252Fconnect 8 Saved Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 What, if any, journal entry would Dowell record in connection with the sublease? Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars View transaction list Journal entry worksheet < 1 Record the sublease of warehouses for the remaining four years of lease term. Note: Enter debits before credits. Transaction 1 General Journal Debit Credit Clear entry Record entry 1 F2 80 F3 72 #3 W E S $ 54 000 800 F4 % d05 View general journal Prev 1 of 3 Next > F5 MacBook Pro 66 & 27 FB 44 F9 J F10 A F7 DII R T Y U 8 9 0 D F G H J K L < C V B N M M Inbox (7. X My Apps X Analytic x Gebook (c x Linea Mix ws Order HX My App: X ASC Pro X M Question ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fconnect.mheducation.com%252Fconn Project Saved 1 Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 S zipped Book 1. On December 31, 2025, what is the balance in Dowell's lease liability? Note: Round your answer to the nearest whole dollar amount. 2. On December 31, 2025, what is the carrying amount (after accumulated amortization) of Dowell's leased warehouses? Note: Round your answer to the nearest whole dollar amount. 3. Obtain the relevant authoritative literature on accounting for derecognition of finance leases by lessees using the FASB's Codification Research System. You might gain access from the FASB website (www.fasb.org), from your school library, or some other source. To determine the appropriate accounting treatment for the proposed sublease, what is the specific seven- digit Codification citation (XXX-XX-XX) that Dowell would rely on to determine: Print a. If the proposal will qualify as a termination of a finance lease? b. The appropriate accounting treatment for the sublease? erences 1. Dowell's lease liability 2. Carrying amount of leased warehouses Number Topic Subtopic Section Paragraph 3-a. 3-b. W 18: 72 F2 3 #3 <Req 1 to 3 Req 4 > 80 000 DOO F3 F4 Q W E A S % 805 54 F5 www Prev 1 of 3 Next > MacBook Pro 66 R T Y & 87 7 Show less A Help 40 DII DD J F7 F8 F9 F10 C 8* 61 9 1 0 D F G H J K Help Save & Exit M Inbox (7 X My App: X Analytic x ebook (X Linea M × Ws Order HX O My App: x ASC Pro X M Question X w Home Check ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fconnect.mheducation.com%252Fconnect%252Fiti... C Project Saved 2 As a senior auditor with Klein and Company, you are interacting with David Perkins, CFO of a prominent public company and an important client. Perkins has a reputation for pushing for favorable accounting treatments, and frequently asks auditors to "prove to me where it says I can't do that." ints Required: Skipped eBook Print 0 References 1. Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org) and select Basic View for free access. Determine the specific eight-digit Codification citation (XXX-XX-XX-X) that indicates the appropriate accounting treatment for each of the following situations, and in each case indicate whether Perkins has authoritative support in the Codification for his preferred treatment. 2. Perkins believes that his deferred tax liabies should be calculated on a discounted present value basis, which allows him to report a smaller amount of liability. "After all, those are amounts that are going to be paid in the future-why can't I discount them like I would other long-term liabilities?" 3. Perkins argues that, when determining whether he should record a valuation allowance against deferred tax assets, he should include as a source of future taxable income any future reversals of existing taxable temporary differences, which will increase taxable income. Doing so will reduce his valuation allowance and tax expense. "We have deferred tax liabilities that will reverse in the same periods as deferred tax assets reverse, so they will provide taxable income that will soak up the deductions produced by reversal of the deferred tax assets. I should get to include them when determining the amount of any valuation allowance we would have to record." 4. Perkins wants to separately list his net current deferred tax asset and his net noncurrent deferred tax liability in his company's balance sheet, thereby improving his company's current ratio. "I have deferred tax assets that I know will reverse next year, and I know my investors will be better off with information about both current and noncurrent assets and liabilities." 5. Perkins does not want to provide a reconciliation of changes in the company's unrecognized tax benefits during the year, given previous concerns by investors that his company is too aggressive in its attempts to avoid paying taxes. "I know your firm has required that we recognize a liability for these uncertain tax positions, and we have done that, but more disclosure is unnecessary. Our financial statements and notes are too long as it is." Adds Authoritative Support for Perkins Mc Graw Hill 1 Requirement Topic Subtopic Section Paragraph 1 2 3 F1 A 72 F2 Q W 80 F3 OOD F4 $ 54 #3 E R LLI A S D Z X リ te C < Prev 2 of 3 www www Next > F5 MacBook Pro % do5 T FL 96 > Y 27 & 40 7 G H * U 8 F10 J DII 44 J FR F9 9 a J K B N Σ 0 P ل V 36 comm M Inbox (7 X My Apps x Analytic x G ebook (cx Linea Mi X Ws Order H X My App: x ASC Pr ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fconnect.mheducatio roject i Saved ed es Determine the specific eight-digit Codification citation (XXX-XX-XX-X) that indicates the appropriate accounting tr each of the following situations, and in each case indicate whether Perkins has authoritative support in the Codifi preferred treatment. 2. Perkins believes that his deferred tax liabäties should be calculated on a discounted present value basis, which a report a smaller amount of liability. "After till, those are amounts that are going to be paid in the future-why can't like I would other long-term liabilities?" 3. Perkins argues that, when determining whether he should record a valuation allowance against deferred tax asse include as a source of future taxable income any future reversals of existing taxable temporary differences, which taxable income. Doing so will reduce his valuation allowance and tax expense. "We have deferred tax liabilities t in the same periods as deferred tax assets reverse, so they will provide taxable income that will soak up the ded produced by reversal of the deferred tax assets. I should get to include them when determining the amount of ar allowance we would have to record." 4. Perkins wants to separately list his net current deferred tax asset and his net noncurrent deferred tax liability in h balance sheet, thereby improving his company's current ratio. "I have deferred tax assets that I know will reverse know my investors will be better off with information about both current and noncurrent assets and liabilities." 5. Perkins does not want to provide a reconciliation of changes in the company's unrecognized tax benefits during previous concerns by investors that his company is too aggressive in its attempts to avoid paying taxes. "I know required that we recognize a liability for these uncertain tax positions, and we have done that, but more disclosu unnecessary. Our financial statements and notes are too long as it is." Requirement Topic Subtopic Section Paragraph 1 Adds Authoritative Support for Perkins 2 3 4 72 80 000 DOD F4 F2 F3 $ 54 #3 L < Prev 2 of 3 Next >> D % 805 MacBook Pro 66 F6 P F7 Dll F8 & 87 8 T Y U 6