At the beginning of current year, Arianne Company sold aPróblem 15-12 (IFRS)machine and immediately leased it back.5,000,0006,000,000500,000Sale price at fair valueCarrying amount of machineAnnual rental payable at the end of each yearLease termRemaining life of machineImplicit interest ratePV of an ordinary annuity of 1 at 6% for 5 perioda5 years20 years6%4.211. What is the cost of right of use asset?a. 2,105,000b. 2,526,000c. 2,895,000d. 1,500,0002. What is the loss on right transferred to the buyer-lessor?a. 579,000b. 505,200c. 500,000d.3. What is the lease liability at year-end?a. 2,177,560b. 1,605,000с. 1,731,300d. 2,105,0004. What is the net annual rental income of the buyer-lessor?a. 373,700b. 200,000с. 500,000d. 250,00017 I 10Page+

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3. What is the lease liability at year-end?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 3MC: Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of...

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of 1 at 15% for 5 periods is 6.74. The present value of 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine? a. 12,500 b. 16,750 c. 25,000 d. 33,700
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Maureen Inc. is a dealer of machinery. On January 1, 2020, it leased a machinery to another entity under the following terms:· Annual rental payable at the end of each year: 1,500,000· Lease term and useful life of machinery: 5 years· Cost of machinery in Maureen’s books: 4,000,000· Fair value of machinery on commencement: 6,000,000· Guaranteed residual value upon return: 500,000· Implicit rate: 12%Relevant PV factors are: PV of ordinary annuity for 5 periods at 12% is 3.60 and PV of 1 for 5 periods at 12% is 0.57. Machinery will revert back to Maureen at end of lease term. Fair value of the asset on December 31, 2024 (end of lease) is 350,000. Maureen also incurred initial direct costs of P200,000. How much is the gross profit of Maureen on January 1, 2020? a. 1,800,000 b. 1,485,000 c. 1,685,000 d. 2,000,000