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PRICE, WATERHOUSE & COMPANY 503
years was considered to be a fair term over which to amortize the cost. The portion of the weekly payments representing carrying, service, and inspection charges was to be considered as expense as paid each week; all repairs or replacements of parts were to be charged off currently.
In the example given the transactions would be recorded as follows :
Dr. Lease of Equipment $13,050.00
To Licensor $13,050.00
To set up the cost of the License Fee or the sound reproducing equipment leased from
for Theater under
agreement dated.
Dr. Licensor 1 ,305 . 00
To Cash 1 , 305 . 00
For deposit on sound reproducing equipment
for Theater on date of signing
contract.
Dr. Licensor 1,957.50
To Cash or Notes Payable 1 , 95 7 . 50
For balance of payment of installation charges at time of completion of installation.
Weekly Entries:
Dr. Amortization 50. 19
To Reserve for Amortization of Lease of Equipment 50. 19
To provide for amortizing license fee and cost of installation over a period of 260 weeks (5 years) .
Dr. Service and Inspection Charges and Carrying
.Charges 52.59
Licensor 94. 11
To Cash 146 . 70
Distribution of weekly payment for first two years, subject to revision should weekly payment be reduced.
After the payments had been made for two years the following entries would be made for the next three years :
Dr. Amortization $ 50. 19
To Reserve for Amortization of Lease of Equipment $ 50. 19
Dr. Service and Inspection Charges
To Cash
After the first five years the payments for service charges, repairs, and maintenance would be charged directly to operations.
Commentary: The first method suggested in this case has been favored by many exhibitors, both because it is somewhat less compli