AASB 16/IFRS 16 requires manufacturer and dealer lessors to recognise selling profit or loss: O systematically over the lease term. O 50% at commencement of the lease and 50% at the end of the lease. O at the commencement of the lease. O at the end of the lease.

AASB 16/IFRS 16 requires manufacturer and dealer lessors to recognise selling profit or loss: O systematically over the lease term. O 50% at commencement of the lease and 50% at the end of the lease. O at the commencement of the lease. O at the end of the lease.

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

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9E: Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8,...

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Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are nude at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Required: 1. Record the lease (including the initial receipt of 2,000) and the receipt of the second and third installments of 2,000 in Ansons accounts. Carry computations to the nearest dollar. 2. Record the lease (including the initial payment of 2,000), the payment of the second and third installments of 2,000, and monthly depreciation in Bullards accounts. The lessee records the lease obligation at net present value. Carry computations to the nearest dollar.
Sales-Type Lease with Guaranteed Residual Value Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2017. The lease is appropriately classified as a sales-type lease. The lease terms, provisions, and related events are as follows: The lease is noncancelable, has a term of 8 years, and has no renewal or bargain purchase option. The annual rentals are 65,000, payable at the end of each year. The interest rate implicit in the lease is 15%. Darwin agrees to pay all executory costs directly to a third party. The cost of the equipment is 280,000. The fair value of the equipment to Calder is 308,021.03. Calder incurs no material initial direct costs. Calder expects that it will be able to collect all lease payments. Calder estimates that the fair value at the end of the lease term will be 50,000 and that the economic life the equipment is 9 years. This residual value is guaranteed by Darwin. The following present value factors are relevant: PV of an ordinary annuity n = 8, i = 15% = 4.487322 PV n = 8, i = 15% = 0.326902 PV n = 1, i = 15% = 0.869565 Required: 1. Determine the proper classification of the lease. 2. Prepare a table summarizing the lease receipts and interest income earned by Calder for this lease. 3. Prepare journal entries for Calder for the years 2019, 2020, and 2021. 4. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the present value of next years payment approach to classify the lease receivable as current and noncurrent. 5. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the change in present value approach to classify the lease receivable as current and noncurrent.
t27 In IFRS 16 par. 74, initial direct costs incurred by a lessor in consummating a manufacturer’s or dealer’s lease areA. charged to unearned income in the first period of the lease term.B. charged to expense in the first period of the lease term.C. deferred and allocated over the lease term in proportion to the recognition of rent revenue.D. deferred and allocated over the lease term on a straight-line basis.
22 Lessors are required to account for lease receipts from operating leases asA. revenue, on a reducing balance over the lease term.B. income, on inception date of the lease.C. income, on a straight-line basis over the lease term.D. revenue, at the end of the lease term.
WITH SOLUTION/COMPUTATION 55. On January 1, 2019, Babson, Inc., leased two automobiles for executive use. The lease requires Babson to make five annual payments of P13,000 beginning January 1, 2019. At the end of the lease term, Babson guarantees the residual value of the automobiles will total P10,000. The interest rate implicit in the lease is 9%. Babson’s recorded lease liability on initial recognition isa. 48, 620 b. 44,070 ` c. 35,620 d. 31,070
A lessee company signed a lease for equipment from a lessor on January 1, Year 1. The lease requires equal rental payments of $18,820 at the beginning of each year of the term. The PV of the lease payments is $108,950. The company pays all executory costs directly to third parties. The appropriate interest rate is 8.65%. Assume IFRS 16 applies. Both the lessor and lessee have December 31 year ends. How much wil be the balance of the Lease Liability in the lessee's books at the end of Year 1 after all adjusting entries assuming (1) the fair value of the equipment equals the PV of the lease payments and (2) any interest is accrued directly to the Lease Liability? 1. $88,134 2. $90,582 3. $93,030 4. $95,478 5. $97,926
t34 Initial direct costs incurred by the lessor in an operating lease should beA. expensed in the year of incurrence by including them in the cost of goods sold or by treating them as a sellingexpense.B. deferred and recognized as reduction in the interest rate implicit in the lease.C. capitalized as part of asset cost and depreciated over the lease term.D. deferred and carried on the statement of financial position until the end of the lease term.
b) The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning ofeach year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term,guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 12% January 1, 2020 The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $65,500. The lessee uses the straight-line depreciation method for all equipment. Instructions (i) What is the lease liability for Telsan Company? (ii) Record the lease on Telsan Company’s books at the date of inception. (iii)Record the first year’s depreciation on Telsan Company’s books. (iv) Record interest expense and lease liability for Telsan…
MN.17. On 1 July 2020 Jane Ltd (lessor) leased equipment to Austin Ltd (Lessee). The equipment had a fair value of $369,824. This was also the present value of the lease payments .The lease agreement contained the following details: Lease term 5 years Economic life 6 years Annual rental payment in arrears commencing 30June 2021 $90,000 Residual Value at end of lease term $80,000 Residual Value guaranteed by lessee 80,ooo Interest rate implicit in lease 12% Lease is cancellable with permission of lessor, Jane Ltd .Lease is classified as a finance Lease by the Lessor . Required: (a)Prepare the Lease payment schedule for Austin Ltd, Lessee, for the first two years, for the year ended 30 June 2021 and for the year ended 30 June 2022.
2....continues The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Splish Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of   each year, beginning with January 1, $119,127 Residual value of equipment at end of lease term,   guaranteed by the lessee $54,000 Expected residual value of equipment at end of lease term $49,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $659,000 Lessor’s implicit rate 6 % Lessee’s incremental borrowing rate 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. Suppose Splish received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be…
35. The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pina Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of   each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term,   guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final…
35.... The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pina Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of   each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term,   guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Suppose Pina received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $incorrect 514,590 Lease…