Cullumber Company leased equipment from Ayayai Company on July 1, 2025, for an eight-year period expiring June 30, 2033. One of the lease terms is a guaranteed residual amount of $13200. The residual expected by Cullumber will be $8100. The lease meets the criteria of a finance lease. What is the residual value amount that would be included in the calculation of Cullumber's lease liability/right- of use asset? The present value of $8100. The present value of $13200. The present value of $5100. The residual would not be included in the calculation of the lease liability/right-of-use asset.

Cullumber Company leased equipment from Ayayai Company on July 1, 2025, for an eight-year period expiring June 30, 2033. One of the lease terms is a guaranteed residual amount of $13200. The residual expected by Cullumber will be $8100. The lease meets the criteria of a finance lease. What is the residual value amount that would be included in the calculation of Cullumber's lease liability/right- of use asset? The present value of $8100. The present value of $13200. The present value of $5100. The residual would not be included in the calculation of the lease liability/right-of-use asset.

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 8RE: Use the following information to decide whether this equipment lease qualifies as an operating,...

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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.
Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee). Required: 1. Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by Edom. 3. Prepare journal entries for Edom tor the years 2019 and 2020.
Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.
Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor. a. There is no transfer of ownership at the end of the lease term. There is no bargain purchase option. The lease term is 60% of the economic life of the leased property. The present value of lease payments, including a residual value guaranteed by the lessee, is 100% of the fair value of the leased property to the lessor. The collectability of the lease payments is reasonably assured. The leased asset was not of a specialized nature. b. Same as (a), except that the residual value is guaranteed by a third party, not the lessee. The present value of the residual value guarantee is 15% of the fair value of the leased property. c. Same as (a), except that: the present value of the lease payments, including a residual value guaranteed by the lessee, is only 50% of the fair value of the leased asset. The collectability of the minimum lease payments is not predictable.
Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
Lagace Ltd. entered into a lease on June 1, 2020. The lease term is six years and requires annual rental payments of $30,000 at the beginning of each year. Lagace’s incremental borrowing rate is 8% and the rate implicit in the lease is 9%. (a) Calculate the capitalized amount of the right-to-use asset if Lagace follows IFRS 16. (b) Calculate the capitalized amount of the leased asset if Lagace follows ASPE. Show calculations using any of the following methods: (1) factor A.5, (2) a financial calculator, or (3) Excel function PV. Round final answers to the nearest cent.
Sunland Company leases equipment from Bridgeport Inc. for five years starting on January 1, 2025. The lease is properly classified as a finance/sales-type lease. The terms of the lease are as follows: a) Bridgeport will pay $2500 in legal fees to execute the lease. b) Bridgeport will incur $1500 of lease documentation costs after the execution of the lease. c) Sunland will pay commissions to the lease negotiator of $2500. d) Sunland must prepay the last month's rental payment of $12500. e) Sunland pays internal engineering costs of $6250 to identify any structural considerations when installing the equipment. f) The initial measurement of the liability for Sunland is $150000. What amount will be reported for Sunland's right-of-use asset at the commencement date? O $168750 O $150000 O $171250 O $169000
On January 30, 2025, Ivanhoe Co. leased equipment to an unaffiliated company for a lease term of three years. At the beginning of the lease, the equipment had a fair value of $344000 and a carrying value of $281100 and a remaining useful life of 5 years. A third party guarantees a residual value of $68800 at the end of the lease. The lease qualifies as a direct financing lease. What journal entry will Ivanhoe record on January 30, 2025? Lease Receivable Deferred Gross Profit Inventory Lease Receivable Deferred Gross Profit Inventory Lease Receivable Inventory Lease Receivable Cost of Goods Sold Sales Revenue Inventory 344000 275200 281100 344000 281100 62900 281100 5900 281100 281100 344000 281100
Wildhorse Company leased equipment to Pina Company on January 1, 2025. Five equal lease payments of $129200 will be made on January 1 of each year. The first lease payment will be made on January 1, 2025. One of the terms of the lease is a guaranteed residual amount of $41500. The residual expected by Pina is $15300. The lease meets the criteria of a finance lease. Pina is not aware of Wildhorse's implicit interest rate and their incremental borrowing rate is 8%. What is the amount Pina will record as the lease liability/right-of-use asset on January 1, 2025 before the first payment is made? 8%, 5 periods $574958 O $585371 $567540 O $557127 PV Annuity Due PV Ordinary Annuity PV Single Sum 4.31213 3.99271 0.68058
The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company and Crane Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term Lease term Economic life of leased equipment Fair value of asset at January 1, 2025 Lessor's implicit rate Lessee's incremental borrowing rate Date 1/1/25 1/1/25 1/1/26 1/1/27 1/1/28 1/1/29 1/1/30 12/31/30 Lease payment (A) $97,312 $97,312 $97,312 $97,312 $97,312 $97,312 $5,000 January 1, 2025 $97,312 $24,806 $20,456 $15,845 $10,957 $5,775 $283 $55,000 $50,000 6 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. Table shows the amortization schedule for lessee for the lease term: $546,000 years years 6 % Interest expense (B = Prev D* 6%)…
The following facts pertain to a non-cancelable lease agreement between Sandhill Leasing Company and Carla Vista Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term Lease term Economic life of leased equipment Fair value of asset at January 1, 2025 Lessor's implicit rate Lessee's incremental borrowing rate Click here to view factor tables. (a) Date 1/1/25 1/1/25 1/1/26 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. 1/1/27 1/1/28 1/1/29 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 answers to O decimal places e.g. 5,275.) 1/1/30 12/31/30 $ $ Annual Lease Payment…
LMN (the lessee) leased a machine from XYZ (the lessor) on January 1, 2023. Relevant information about the finance lease follows: ▪ The lease has a 5 year term, beginning January 1, 2023 and ending December 31 of the final year of the lease. ▪ The lease requires annual payments of $10,000. The first payment is made on the date the lease is signed (January 1, 2023), and subsequent payments are made on December 31 of 2023 and each December 31 after that. ■ The asset has a fair value of $43,121 and an economic useful life of 6 years. ▪ The asset will be returned to XYZ (the lessor) at the end of the lease term. ▪ The lease includes an implicit interest rate of 8% per year. At that rate, the present value of the lease payments is equal to the asset's fair value. Required: What dollar amount will ABC report as the Lease Payable balance as of December 31, 2023 (the end of the first year, after the second payment)?