a. Prepare the lease amortization schedule(s) for Donahue for all 4 years of the lease. b. Prepare the journal entries for Donahue for 2022 and 2023. c. Suppose Donahue incurs initial direct costs of €750 related to the lease. Prepare the journal entries for 2022.
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- P21-15 (Please use the latest IFRS accounting standards to answer the question, and take note that lessee do recognise depreciation) Cleveland Group leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract starting January 1, 2022. Terms of the lease require payments of R$48,555 each January 1, starting January 1, 2022. The crane has an estimated life of 7 years, a fair value of R$240,000, and a cost to Cleveland of R$240,000. The estimated fair value of the crane is expected to be R$45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and the crane is not a specialized asset. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is probable. Abriendo's incremental borrowing rate is 8%, and Cleveland's implicit interest rate of 8% is known to Abriendo. Instructions a. Identify the type of lease involved and give reasons for your…Eubank Company, a lessee, enters into a lease agreement on January 1, 2021, for equipment. The following data are relevant to the lease agreement: - The term of the noncancelable lease is 4 years. Payments of $978,446 are due on January 1 of each year. The first payment is January 2021. - The fair value of the equipment on January 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with nosalvage value. - Eubank uses the straight-line method of depreciation. - Eubank’s implicit rate is 8%. - This will be treated as a finance lease (Lessee Perspective). Instructions: Prepare the journal entries on Eubank’s books (lessee) that relate to the lease agreement for the following dates, you do not need to create an amortization schedule. a. January 1, 2021. b. December 31, 2021.7...e1 Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build three diesel-electric engines to Sage’s specifications. Upon completion of the engines, Sage has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $405,443 each January 1, starting January 1, 2020.Sage’s incremental borrowing rate is 8%. The implicit interest rate used by Pronghorn and known to Sage is 7%. The total cost of building the three engines is $2,685,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Sage depreciates similar equipment on a straight-line basis. At the end of the lease, Sage assumes title to the engines. Collectibility of the lease payments is probable.Click here to view factor tables. (a) Your answer has been saved. See score details after…
- On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…P46 On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual payments at the beginning of each lease year. The machine has a useful life of 15 years without salvage value. Title passes to Sorn Company at the lease expiration date. Sorn Company's accounting year ends on December 31 and it uses straight-line method of depreciation for all of its property, plant and equipment, computed to the nearest full month. Aggregate lease payments have a present value of P2,520,000 on June 1, 2019 based on an appropriate rate of interest. For the year 2019, what amount of depreciation expense should Sorn record for the leased machine? A. P252,000 B. P168,000 C. P147,000 D. P98,000
- Crane Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2020, to lease equipment to Irvine Limited. The following information relates to the agreement. 1. The term of the non-cancellable lease is six years, with no renewal option. The equipment has an estimated economic life of eight years. 2. The asset’s cost to Crane, the lessor, is $314,000. The asset’s fair value at January 1, 2020, is $314,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $45,374, which is not guaranteed. 4. Irvine Limited, the lessee, assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2020. 6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties about costs that have not yet been incurred by the lessor.…On January 1, 2022, Tiktok Company leased a heavy equipment to be used in its construction business. The following information relates to the lease: Lease term -10 years Useful life of the equipment - 12 years Annual rental payable in advance every January 1 - P240,000 Implicit interest rate - 14% Incremental borrowing rate - 12% Tiktok has the option to purchase the leased asset by paying P400,000, which approximates the fair value of the equipment on the option exercise date. (Round off the PV factor to four decimal places)What is the cost of the right-of-use asset?7,,,new,,,b,c,d...continues Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build three diesel-electric engines to Sage’s specifications. Upon completion of the engines, Sage has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $405,443 each January 1, starting January 1, 2020.Sage’s incremental borrowing rate is 8%. The implicit interest rate used by Pronghorn and known to Sage is 7%. The total cost of building the three engines is $2,685,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Sage depreciates similar equipment on a straight-line basis. At the end of the lease, Sage assumes title to the engines. Collectibility of the lease payments is probable.Click here to view factor tables. (a) Your answer has been saved. See…
- n January 1, 2022, Tiktok Company leased a heavy equipment to be used in its construction business. The following information relates to the lease: Lease term -10 years Useful life of the equipment - 12 years Annual rental payable in advance every January 1 - P240,000 Implicit interest rate - 14% Incremental borrowing rate - 12% Tiktok has the option to purchase the leased asset by paying P400,000, which approximates the fair value of the equipment on the option exercise date. (Round off the PV factor to four decimal places)What is the cost of the right-of-use asset?Herald Company is a dealer in equipment. On January 1, 2020, an equipment was leased to another entity with the following provisions: Annual rental payable at the end of each year P1,500,000 Lease term and useful life of machinery 5 years Cost of equipment P4,000,000 Residual value – unguaranteed P500,000 Implicit interest rate 12% At the end of the lease term on December 31, 2024, the equipment will revert to the lessor, Herald Company. The perpetual inventory system is used. Herald Company incurred initial direct cost of P200,000 in finalizing the lease agreement. 1. What is the total financial revenue to be reported by Herald Company? 2. What is the interest revenue to be recognized by Herald for 2020? 3. Herald Company should report profit on the sale for 2020 at?At December 31, 2021, ABC Company has an outstanding purchase commitment with contract purchase price of P 1,000,000 and the market value on this date is P 950,000 which is different from the expected market value of P 990,000. QUESTION: What is the amount of Loss on Purchase Commitment to be recorded at December 31, 2021?