Assume that a capital lease is initiated by a local governmental unit at 1/1/2021. The payments will be $100,000 per year at the end of each year. Assume that the net present value is $682,500. The implicit rate of interest is 3%. the journal entries for the lease incept on 1/1/2022 using the following assumptions: A governmental fund records the lease A proprietary fund records the lease
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Assume that a capital lease is initiated by a local governmental unit at 1/1/2021. The payments will be $100,000 per year at the end of each year. Assume that the
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A governmental fund records the lease |
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A proprietary fund records the lease |
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- Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).Kendall County entered into a lease agreement to finance computer equipment used in government offices. The lease covers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At the inception of the lease, a payment of $640,000 will be made; two additional annual lease payments of $640,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,920,000. The lease arrangements implied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $1,864,620. Assume that the fair value of the equipment at the inception of the lease is $1,900,000. What amount would the liability be reported at the end of the first year
- On January 1, 2023, Murray Manufacturing leased a building for use in its operations from Associated Realty. The 7-year, noncancellable lease requires annual lease payments of $22,000, beginning January 1, 2023, and at each December 31 thereafter through 2028.The lease payment includes costs related to property taxes of $2000. They also include payments for common area maintenance. The observable standalone price for the lease (including the property taxes) is $20,000 and the observable standalone price for the common area maintenance is $4000.In addition, Murray agrees to pay insurance on the building. Murray pays the insurance each year when it receives an invoice from Associated Realty for the insurance amount. On December 15, 2023, Murray was billed and paid $2500 for this insurance. Murray does not make the election to account for each separate lease component, along with its associated nonlease components, as a single lease component.The lease agreement does not transfer…On January 1, 2023, Murray Manufacturing leased a building for use in its operations from Associated Realty. The 7-year, noncancellable lease requires annual lease payments of $22,000, beginning January 1, 2023, and at each December 31 thereafter through 2028.The lease payment includes costs related to property taxes of $2000. They also include payments for common area maintenance. The observable standalone price for the lease (including the property taxes) is $20,000 and the observable standalone price for the common area maintenance is $4000.In addition, Murray agrees to pay insurance on the building. Murray pays the insurance each year when it receives an invoice from Associated Realty for the insurance amount. On December 15, 2023, Murray was billed and paid $2500 for this insurance. Murray does not make the election to account for each separate lease component, along with its associated nonlease components, as a single lease component.The lease agreement does not transfer…On January 1, 2023, Murray Manufacturing leased a building for use in its operations from Associated Realty. The 7-year, noncancellable lease requires annual lease payments of $17,000, beginning January 1, 2023, and at each December 31 thereafter through 2028.The lease payment includes costs related to property taxes of $2000. They also include payments for common area maintenance. The observable standalone price for the lease (including the property taxes) is $15,000 and the observable standalone price for the common area maintenance is $4000.In addition, Murray agrees to pay insurance on the building. Murray pays the insurance each year when it receives an invoice from Associated Realty for the insurance amount. On December 15, 2023, Murray was billed and paid $2500 for this insurance. Murray does not make the election to account for each separate lease component, along with its associated nonlease components, as a single lease component.The lease agreement does not transfer…
- Neal Company entered into a nine-year lease on a warehouse on Dec. 31, 2019. Lease payments of 520,000 which included executory cost of 20,000 is due annually, beginning on Dec. 31, 2020 and every Dec. 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of 200,000. The interest rate implicit in the lease is 9%. The PV of an ordinary annuity of 1 for nine years at 9% is 5.60. 1. What amount should be reported as lease liability on December 31,2020? a. ₱ 4,500,000 b. ₱ 2,912,000 c. ₱ 4,680,000 d. ₱ 2,800,000 2. What is the initial recognition of the right of use asset? a. ₱ 3,112,000 b. ₱ 2,800,000 c. ₱ 3,000,000 d. ₱ 4,700,000 3. What is the carrying value of the right of use asset on December 31, 2021? a. ₱ 2,520,000 b. ₱ 2,488,889 c. ₱ 2,750,000 d. ₱ 2,666,667On January 1, 2018, Jasperse Corporation leased equipment under a finance lease designed to earn the lessora 12% rate of return for providing long-term financing. The lease agreement specified ten annual payments of$75,000 beginning January 1, and each December 31 thereafter through 2026. A 10-year service agreement wasscheduled to provide maintenance of the equipment as required for a fee of $5,000 per year. Insurance premiumsof $4,000 annually are related to the equipment. Both amounts were to be paid by the lessor and lease paymentsreflect both expenditures. At what amount will Jasperse record a right-of-use asset?Land City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expiration of the lease, the trucks will revert to the city. 1. Prepare appropriate journal entries in the general fund, the general fixed assets account group, and the general long-term debt account group to record the signing of the lease. 2. Prepare appropriate journal entries in the same fund and account groups to record the first payment on the lease. The city records depreciation on garbage trucks using the straight-line method.
- On December 31, 2019, an entity leased two automobiles for executive use. The lease required the entity to make five annual payments of P1,500,000 beginning December 31, 2019. At the end of the lease term, December 31, 2024, the entity had a residual value guarantee of the automobiles at P1,000,000. The interest rate implicit in the lease is 10% and present value factors at 10% for 5 periods are 4.17 for an annuity due, 3.79 for an ordinary annuity and 0.62 for present value of 1. What is the lease liability on December 31, 2020? What is the current portion of the lease liability on December 31, 2020? What is the interest expense for 2020?On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $779,224 over a three-year lease term (also the asset’s useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 9%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.2 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 1. What is the pretax amount of net receivable? 2. What is pretax amount of interest revenue? Ignore taxes for both questionsLeased assetsOn January 1, 2021, the chief operating officer of New Belgium, Jeff Stambaugh, signed a noncancellable lease for street equipment. The lease was for 10 years.The present value of payments expected to be made during the lease is $75,152. The township’s incremental borrowing rate is 7 percent. The $10,000 annual lease payment is due on the first day of each year beginning in 2021.Prepare all journal entries necessary to record the lease transaction for 2021 and the payment made in 2022.(Assume the government uses a voucher system.)