For each of the following activities, indicate an appropriate allocation base
Activity Allocation Base
Warranty Services-Providing service for defective products
Setup-Setting up machines for production
Shipping-Shipping finished products to customers
Machining-Machine usage
Purchasing-Purchasing raw materials
What will be an ideal response
Students answers will vary. Suggest answers:
Activity Allocation Base
Warranty Services—Providing service for defective products Number of service calls
Setup—Setting up machines for production Number of batches
Shipping—Shipping finished products to customers Number of pounds of product shipped
Machining—Machine usage Number of machine hours
Purchasing—Purchasing raw materials Number of purchase orders
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On January 1, Teague Company leased office equipment from Sprague Corporation. The lease qualifies as an operating lease. The term is three years and calls for semiannual payments of $25,000 each, payable on June 30 and December 31 of each year. Sprague acquired the machines at a cost of $150,000 on January 1 of the current year. The expected life is five years with no residual value expected
Required: 1. Prepare the appropriate journal entries for the lessee for the first year. 2. Show how the lessor would disclose this lease on the face of the balance sheet for December 31 of the current year. What will be an ideal response?