Blanket Co. purchased an equipment on January 1, 2020 for $500,000 for lease purposes. It has an estimated useful life of 10 years without salvage value. The company leased the machine on March 31, 2020 at $8,000 monthly for four years. Blanket Co. required security deposit of $100,000 on March 31, 2020 which shall be returned to the lessee upon lease expiration. What amount should be credited to rent income upon receipt of the $100,000 security deposit?
Q: How much loss should be deferred beyond 2019 as a result of this leaseback transaction?
A: Lease: Lease is a contract between two parties where, lessee (user of the asset) pays rental…
Q: Happy Company purchased a packing machine intended for leasing at a cost of P330,000. The machine…
A: Interest revenue is calculated by Lease liability present value *Interest rate.. Lease…
Q: On January 1, 2020, ABC Company (lessee) leased a machine from Bank XYZ under a 12-month lease. ABC…
A: A contract of agreement having two parties, in which one parties rents asset to the other party is…
Q: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The…
A: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The…
Q: On January 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals are…
A: The lease liability is calculated as the present value of future lease payments Lease liability =…
Q: On January 2, 2022, Bergify Co. entered into a 5-year lease contract for drilling equipment. Bergify…
A: Under the double-declining balance method, the depreciation is charged on the declining balance of…
Q: On January 1, 2020, a machine was purchased for $400,000 by Younger Leasing Co. The machine is…
A: Initial measurement of Lesae liability and Right-of-Use Asset: PV of lease payment = Annual lease…
Q: Arlington Co. leased a truck for a period of 5 years, which is the economic life of the asset. (The…
A: A lease is a legal agreement between the lessor and the lessee. The lessor allows lessee to use the…
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: The question is related to Accounting for Lease. The assets has been given for 10 years by lessor…
Q: On January 1, 2020, Windsor Co. leased a building to Wildhorse Inc. The relevant information related…
A: The following calculations are done to evaluate the building put on lease by Windsor Company.
Q: On January 1, 2021, Wait Company leased equipment from a lessor with the following information:…
A: The question is related to Accounting for Lease. The lessee will records the leased assset and…
Q: EQUIRED: a.) At what amount should Diana record the leased asset at January 1,2020? b.) Prepare the…
A: Lease Payment 86,680 Lease Term 5 year Unguaranteed Residual Value 50000 fair value of the…
Q: January 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals are…
A: Present value of lease liability is::P6,97,380.... Present value factor discounted for 10% for 4 yrs…
Q: On January 2, 2021, Sandhill, Inc. signed a 10-year noncancelable lease for a heavy duty drill…
A: Financial lease is that lease where lessor has given right to use the assets to lessee which cover…
Q: Lazy Company leased a building with useful life of 10 years on January 1, 2020 for period of 8 years…
A: Year Date Interest Rate PV of Interest Rate Annual rental payment PV of annual rental payment 1…
Q: ABC Company is engaged in leasing equipment. An equipment was delivered to a lessee on December…
A: Lease receivable for the lessor is calculated as sum total of Present Value of Annual Lease payments…
Q: On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: A lease is a written agreement that indicating the conditions within which a lessor acknowledges to…
Q: Brent Corporation owns equipment that cost $80,000 and has a useful life of 8 years with no salvage…
A:
Q: What amount should be reported as gain from sale of the machinery for 2020?
A: Given information is: On December 31, 2020, Colorado Company sold a machinery to Chicago Company and…
Q: On January 1, 2022, Lessee Company leased a machine with an estimated useful life of 10 years from…
A: The right of use asset is depreciated over the useful life of such asset if the ownership of the…
Q: In the income statement for 2020, what amount should be reported as gain from the sale of the truck?
A: Given information is: On December 31, 2020, Grains Company sold a truck to Bryan Company and…
Q: On January 1, 2020, Metlock Co. leased a building to Ivanhoe Inc. The relevant information related…
A: Date Account tittles Debit ($) Credit ($) 01-01-20 Building A/c 3,500,000 To Bank A/c…
Q: At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: Requirement 1:
Q: Reuben Company retires a machine from active use on January 2, 2019, for the express purpose of…
A: Solution Net income refer to the amount an individual and business makes after deducting costs ,…
Q: On January 1, 2021, Crane Corporation signed a 5-year noncancelable lease for equipment. The terms…
A: The agreement of using an asset by lessee while the ownership is still with lessor is called lease…
Q: Casanova Company leased a warehouse with adjoining land for a period of 15 years starting April 1,…
A: Working notes :- The building value is 2,500,000 and…
Q: On January 1, 2019, Steward Co. signed an 8-year non-cancelable lease for a new, machine, requiring…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: On January 1, 2020, a machine was purchased for $400,000 by Younger Leasing Co. The machine is…
A: The main difference between IFRS and ASPE using is that the lease is Capital Lease under IFRS while…
Q: A. To raise operating funds, Pepero Company sold its equipment on March 31, 2019 for P470,000 and…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Reuben Company retires a machine from active use on January 2, 2019, for the express purpose of…
A: Step 2 in solution.
Q: Happy Company purchased a packing machine intended for leasing at a cost of P330,000. The machine…
A: In the books of Happy Company, Lease rental receivable will be accounted as a result of lease. This…
Q: Indicate the type of lease Eubank Company has entered into and what accounting treatment is…
A:
Q: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The…
A: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020.The…
Q: Hurricane Company leased an excavator on January 1, 2018. According to the terms of the agreement,…
A: Hurricane company leased an excavator on 01.01.2018 Lease rent per annum = 20000 TL for 6 years…
Q: n January 1, 2021, Dean Corporation signed a ten-year noncancelable lease for certain machinery. The…
A: Depreciation is the loss of an asset's value due to normal wear and tear. Machinery, furniture, and…
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: Depreciation refers to the reduction in the sum value of an asset over a course of time that…
Q: On January 1, 2019 VT Company sold equipment with an estimated useful life of 5 years. At the same…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: , Sheridan Corporation signed a 5-year noncancelable lease for equipment. The terms of the lease…
A: Interest expense is accrued Interest
Q: On January 1, 2020, Parker Company signed an 8-year noncancelable, nonrenewable lease agreement to…
A: There are mainly 2 types of lease: Operating and capital lease from the point of view of the lesee…
Q: On January 1, 2020, Nelson Co. leased a building to Wise Inc. The relevant information related to…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Maris Co. purchased a machine on January 1, 2020, for $2,500,000 for the express purpose of leasing…
A: Annual depreciation=$2,500,0005=$500,000
Q: On December 31, 2019, Windsor Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: Present Value of Lease Payments = = $8,092 x (1 + 3.17) = $33,743
Q: n January 1, 2022, Tiktok Company leased a heavy equipment to be used in its construction business.…
A: Requirement : In the question it asked to calculate the cost of right to use assets with the given…
Q: Hips Company purchased an asset with a list price of P130,000 to be delivered on July 1, 2021 with…
A: Since the asset is purchased on July 1, 2021, just half-year depreciation expense would be charged…
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: Depreciation (Straight line method) = (Cost of the assets - Salvage value) / Life of the assets
Q: March 1, 2021, Astrid Corporation purchased an equipment for P500,000 with an estimated residual…
A: Lease revenue:::36,000P Lease Bonus:::P18,000.. Less: Insurance costs:::P8,000.. Less: Maintenance…
Step by step
Solved in 2 steps
- 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. 47,910On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
- Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for 100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 45,000. The estimated residual value remains at 10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for 40,000 on January 1, 2018. It had an estimated residual value of 4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for 80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is 8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.
- On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?
- Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offs] lore oil platforms. Petes Petroleum is required legally to dismantle and remove the platforms at the end of their useful lives, which is estimated to be 10 years. On January 1, 2019, Pete constructed and began operating an offshore oil platform off the coast of Brazil. The total capitalized cost to construct the platform was 3,700,000. In addition, while the future cost of dismantling the oil platform is difficult to estimate, Pete believes there is a 40% chance that the future cost will be 1,425,000, a 40% chance it will be 1,650,000, and a 20% chance that it will cost 2,125,000. The appropriate discount rate is 12%, and Pete uses the straight-line method of depreciation. Required: 1. Prepare the journal entries that Pete should record in 2019 related to the oil platform. 2. Prepare an amortization schedule for the asset retirement obligation. 3. Next Level Prepare a table showing the effect of accounting for the asset retirement obligation on assets, liabilities, shareholders equity, and net income relative to accounting for the associated costs at the end of the assets service life when the expenditure is made.Lease Income and Expense Reuben Company retires a machine from active use on January 2, 2019, for the express purpose of leasing it. The machine had a carrying value of 900,000 after 12 years of use and is expected to have 10 more years of economic life. The machine is depreciated on a straight-line basis. On March 2, 2019, Reuben leases the machine to Owens Company for 180,000 a year for a 5-year period ending February 28, 2024. Under the provisions of the lease, Reuben incurs total maintenance and other related costs of 20,000 for the year ended December 31, 2019. Owens pays 180,000 to Reuben on March 2, 2019. The lease was properly classified as an operating lease. Required: 1. Compute the income before income taxes derived by Reuben from this lease for the calendar year ended December 31, 2019. 2. Compute the amount of rent expense incurred by Owens from this lease for the calendar year ended December 31, 2019.