Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Third Bank purchased the equipment at a cost of $1.400,000. Chance elected the short-term lease option. Appropriate adjusting entries are made annually. Related Information: 1 year (4 quarterly periods) $56,000 at Jan. 1, 2018, and at Mar. 31, June 30, and Sept. 30. 5 years Lease term Quarterly lease payments Economic lite of anset Interent rate charged by the lessor Required: Prepare appropriate entries for Chance from the beginning of the lease through December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.) View transaction list
Q: On September 1, 2021, Fantastic Company leased furniture and fixtures from Gorgeous Company under a…
A: The net income is calculated as difference between revenue and expenses of the current period.
Q: Inn Company leased office premises to Ava, Inc. for a two-year term beginning March 1, 2021 up to…
A: First year rent = P20,000 x 12 months = P240,000 Second year rent = P20,000 x…
Q: SNOWMAN Company leased office premises to JACK FROST Inc. for a 5-year term beginning January 2,…
A: Rental revenue on operating leases should be recognized on a straight-line basis unless another…
Q: On January 1, Espinoza Moving and Storage leased a truck for a four-year period, at which time…
A:
Q: On January 1, 2006, Solitaire Company leased equipment for 7 years. The lease required an annual…
A: Case : Here, The Solitaire Company leased equipment for 7 years for which it received $ 25000 for…
Q: On April 1, 2019, Golden State Company leased a delivery truck from Warriors Company under a…
A: Calculation of the amount of Rent Expense to be recognised for the year ended December 31,2019 in…
Q: g lease, rent for the first year is P80,000 and rent for years 2 through 5 is P125,000 per annum.…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: On January 1, 2018, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: ABC Company decided to enter the leasing business. The entity acquired a specialized packaging…
A: Present value of residual value of the machine = residual value of the machine x present value of 1…
Q: On January 1, 2021, Feline Financing Co. leased equipment to Kuting, Inc. information on the lease…
A: The useful life of the equipment is 5 years and the lease term is of 4 years. So We can say that it…
Q: Newton Labs leased chronometers from Brookline Instruments on January 1, 2021. Brookline Instruments…
A: = = =…
Q: As an incentive to enter a 4 year operating lease for a warehouse, Dunhill Company received an…
A: Lease is a type of contract between two parties under which the actual owner of the asset who is…
Q: Ava Company leased office premises to Olivia, Inc. for a two-year term beginning March 1, 2021 up to…
A: Companies sometimes do not own the property but get the same property on lease for a definite period…
Q: On August 1, 2019, Pha Aviation leased two helicopters from Wayo Aircraft for an initial period of…
A: solution given: the schedule of lease payment is given as 1st two months - P15,000 per monthNext…
Q: Angelo Company decided to enter the leasing business. The entity acquired a specialized packaging…
A: Given information, Acquisition cost of the machine =P2,300,000 Residual value of the machine…
Q: ABC Company decided to enter the leasing business. The entity acquired a specialized packaging…
A: Present value of residual value of the machine = residual value of the machine x present value of 1…
Q: .Inn Company leased office premises to Ava, Inc. for a two-year term beginning March 1, 2021 up to…
A: Formula: Total Rent = Rent per month x Number of months.
Q: On January 1, 2018, Jasperse Corporation leased equipment under a finance lease designed to earn the…
A: Annual payments = $ 75000 Lease agreement period = 10 years Rate of return = 12 % Annual maintenance…
Q: On January 1, 2019, Solitaire Company leased equipment for 7 years. The lease is correctly…
A: Lease classify as sale type lease means it is a financial lease where lessor has given right to use…
Q: ABC Company leased equipment to DEF Company on July 1,2019, for a one year period expiring on June…
A: Lease is the facility available to the lessee to use the asset for a certain period and make payment…
Q: On April 1, 2019, Golden State Company leased a delivery truck from Warriors Company under a…
A: Total rent payable during the lease term = (P200,000 x 9 month) + (100,000 x 18 months) + (80,000 x…
Q: ABC Company decided to enter the leasing business. The entity acquired a specialized packaging…
A: Solution: Present value of residual value = P200,000 * PV factor of 1 at 12% for 6th period…
Q: lpha Company was P1,377,480 which approximates the fair value on the lease date. The expected…
A: Lease payments are payments made by a lessee under a lease agreement to the lessor, who is the owner…
Q: On January 1, 2016, Renee Corp., a lessee, signed a five-year capital lease for new equipment. The…
A: The last entry made by Renee is an entry for the loss on residual value.
Q: .Inn Company leased office premises to Ava, Inc. for a two-year term beginning March 1, 2021 up to…
A: Formula: Total rent revenue = Rent per Month x Number of months
Q: b Company, a lessor of office machines, purchased a new machine for P 150,000 on January 1, 2020,…
A: Lease gives the right to use the assets by payment of periodic payment during the lease period and…
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: Current liabilities are those liabilities that need to be paid or settled within a short period of…
Q: On January 1, 2020, Paulina Co. leased an equipment from Gabriela Inc. for a period of 5 years.…
A: Lease liability = Present value of minimum lease payment + Bargain Purchase price paid =…
Q: On January 1, 2019, Inside Company purchased equipment at a cost of P5,000,000 with a useful life of…
A: solution given cost of equipment =5000000 useful life =10 years annual depreciation…
Q: Melmar Company leased a building for 20 years effective January 1, 2020. The useful life of the…
A: A lease is an arrangement where a lessor agrees to allow a lessee to control the use of the asset…
Q: ABC Company decided to enter the leasing business. The entity acquired a specialized packaging…
A: Solution: Present value of residual value = P200,000 * PV factor at 12% for 6th period = P200,000 *…
Q: On July 1, 2021, Walton Company leased office premises for a 3 year period at an annual rental of…
A: Prepaid Rent - Prepaid rent is the rent paid in advance which is not incurred yet but paid in…
Q: ABC Company leased equipment to DEF Company on July 1,2019, for a one year period expiring on June…
A: In case of short term operating lease, Lease income or expenses are recognized on straight line…
Q: ludares Company leased a machinery on January 1, 2021 with the following information: Annual rental…
A: Ans. In case of lease the total value of right of use assets need to be find out for determining the…
Q: ABC Company decided to enter the leasing business. The entity acquired a specialized packaging…
A: Present value of residual value of the machine = residual value of the machine x present value of 1…
Q: On April 1, 2019, Golden State Company leased a delivery truck from Warriors Company under a…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: On January 1, 2017, Zingo Company signed a contract to lease Bingo Company an equipment has a useful…
A: Part -1 Lesse wil record the asset at present value of Lease Payments $ considering Salvage…
Q: On September 1, 2021, AYE Company entered into one-year nonrenewable lease, commencing on that date,…
A: Total amount paid = Bonus to obtain lease + First month’s rent + Last month’s rent = ₱ 120,000 +…
Q: On January 1, 2016, Sweetwater Furniture Company leased office space under a 21-year operating lease…
A:
Q: ABC Company leased equipment to DEF Company on July 1,2019, for a one year period expiring on June…
A: The method by which a corporation tracks the financial effects of its leasing activity is known as…
Q: .On August 1, 2020, Sputnik Company leased furniture and fixtures from Home Company under a one-year…
A: Formula: Total rent expense = Per month rent x Number of months.
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: ance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Third B quipment at a…
A: Journal entry refers to the process of recording commercial transactions for the first time in the…
Q: Please answer in good accounting form. Thanks! On January 1, 2020, EEE Corp. leased a warehouse for…
A: SOLUTION- WORKING-1 CALCULATION OF RIGHT TO USE ASSET- YEAR LEASE RENTAL PVF @12% PRESENT VALUE…
Q: Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Third Bank purchased…
A: No journal entry required on beginning of lease
Q: Determine the unearned interest income on January 1,2020. Determine the gross profit on sale.…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: On January 1, 2018, JOSH Corporation leased out an office space for 15 years to PH Corporation at an…
A: Lease is a type of contract which provides the lessee the right to use the asset of the lessor and…
Q: At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: 1.
Q: On January 1, 2019, Travel Corporation signed an 8-year operating lease for office space at P300,…
A: Additional rent for 2019 = (annual company sales - 2000000) x 5% = (2500000-2000000)*5% = P25,000
Q: Please answer in good accounting form. Thanks! On January 1, 2020, EEE Corp. leased a warehouse for…
A: SOLUTION- CALCULATION OF LEASE LIABILITY- YEARS LEASE RENTAL PVF@ 12% PRESENT VALUE 2020…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 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.Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.
- Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms: 1. Twenty-four lease rentals of 2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable. 2. The cost of the heavy equipment to Ramsey was 55,000. 3. Ramsey uses an implicit interest rate of 18% per year and will account for this lease as a sales-type lease. Required: Prepare journal entries for Ramsey (the lessor) to record the lease contract on March 1, 2019, the receipt of the first two lease rentals, and any interest income for March and April 2019. (Round your answers to the nearest dollar.)Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of 300,000, and a zero estimated residual value. 3. Sax agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. The annual payment is set by Appleton at 83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Saxs incremental borrowing rate is 10%. 6. Sax uses the straight-line method to record depreciation on similar equipment. Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax. 2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar). 3. Prepare a table summarizing the lease payments and interest expense. 4. Prepare journal entries for Sax for the years 2019 and 2020.
- Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.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.Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line method
- 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).Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.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.