Delaney leases an automobile with a fair value of P10,000 from Simon motors on
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Delaney leases an automobile with a fair value of P10,000 from Simon motors on
the following terms:
- Non-cancellable term of 50 months
- Rental of P200 per month (at the beginning of each month). The PV factor at 0.5% per month is 44.3635.
- Delaney guarantees a residual value of P1,180 (the present value at 0.5% per month is P920). Delaney expects the probable residual value to be P1,180 at the end of the lease term.
- Estimated economic life of the automobile is 60 months.
- Delaney’s incremental borrowing rate if 6%. Simon’s implicit rate is unknown.
1. What is the present value of the lease payments to determine the lease liability?
2. How much
3. Suppose that instead of P1,180, Delaney expects the residual value to be only P500. How much will be the PV of lease payments?
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- Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?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. 47,910Delaney leases an automobile with a fair value of P10,000 from Simon motors on the following terms: Non-cancellable term of 50 months Rental of P200 per month (at the beginning of each month). The PV factor at 0.5% per month is 44.3635. Delaney guarantees a residual value of P1,180 (the present value at 0.5% per month is P920). Delaney expects the probable residual value to be P1,180 at the end of the lease term. Estimated economic life of the automobile is 60 months. Delaney’s incremental borrowing rate if 6%. Simon’s implicit rate is unknown. Suppose that instead of P1,180, Delaney expects the residual value to be only P500. How much will be the PV of lease payments?
- Delaney AG leases an automobile with a fair value of €10,000 from Simon Motors, on the following terms. Non-cancelable term of 50 months. Rental of €200 per month (at the beginning of each month). (The present value at 0.5% per month is €8,873.) Delaney guarantees a residual value of €1,180 (the present value at 0.5% per month is €920). Delaney expects the probable residual value to be €1,180 at the end of the lease term. Estimated economic life of the automobile is 60 months.5. Delaney's incremental borrowing rate is 6% a year (0.5% a month). Simon's implicit rate is unknown. Instructions What is the present value of the lease payments to determine the lease liability? Based on the original fact pattern, record the lease on Delaney's books at the date of commencement. Record the first month's lease payment (at commencement of the lease). Record the second month's lease payment. Record the first month's amortization on Delaney's books (assume straight-line). 4. Suppose…Splish Brothers Company leases an automobile with a fair value of $13,924 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months.2. Rental of $280 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.)3. Splish Brothers guarantees a residual value of $1,580 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,580 at the end of the lease term.4. Estimated economic life of the automobile is 60 months.5. Splish Brothers’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown. Click here to view factor tables.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Collapse question part(a) What is the nature of this lease to Splish Brothers? The nature of this lease is a/an select a nature of the leasefinancelease. Collapse question part(b) What is the present value of the lease payments to determine…Splish Brothers Company leases an automobile with a fair value of $13,924 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months.2. Rental of $280 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.)3. Splish Brothers guarantees a residual value of $1,580 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,580 at the end of the lease term.4. Estimated economic life of the automobile is 60 months.5. Splish Brothers’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown. Click here to view factor tables.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Collapse question part(a) What is the nature of this lease to Splish Brothers? The nature of this lease is a/an select a nature of the leasefinancelease. Collapse question part(b) What is the present value of the lease payments to determine…
- Splish Brothers Company leases an automobile with a fair value of $13,924 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $280 per month (at the beginning of each month). (The present value at 0.5% per month is $8,873.) 3. Splish Brothers guarantees a residual value of $1,580 (the present value at 0.5% per month is $920). Delaney expects the probable residual value to be $1,580 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Splish Brothers’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown. Click here to view factor tables.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the nature of this lease to Splish Brothers? The nature of this lease is a/an select a nature of the lease…Sage Hill Company leases an automobile with a fair value of $12,257 from John Simon Motors, Inc., on the following terms: 1. Non-cancelable term of 50 months. 2. Rental of $250 per month (at the beginning of each month). 3. Sage Hill guarantees a residual value of $1,190. Delaney expects the probable residual value to be $1,190 at the end of the lease term. 4. Estimated economic life of the automobile is 60 months. 5. Sage Hill’s incremental borrowing rate is 6% a year (0.5% a month). Simon’s implicit rate is unknown. Click here to view factor tables. (a) What is the nature of this lease to Sage Hill? The nature of this lease is a/an select a nature of the lease lease. eTextbook and Media List of Accounts Attempts: 2 of 3 used What is the present value of the lease payments to determine the lease liability?On January 1, Garcia Supply leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $36,000 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $35,000. What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee?
- At the beginning of 2021, Killion Co. leased furniture to GameStop under a seven-year operating lease agreement. The lease requires quarterly payments of $30,000 each. The furniture was acquired by Killion at a cost of $2.5 million and was expected to have a useful life of 25 years with no residual value. How will GameStop's net income be impacted by this lease? (ignore taxes)? (Enter your answer in whole dollars.).Blossom Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $96,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Blossom expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. Prepare the journal entry at commencement of the lease for Blossom Prepare the journal entry at commencement of the lease for Sharrer. Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Blossom’s implicit rate (Sharrer’s incremental borrowing rate is 9%), and (2) Sharrer incurs…Riverside Inc. plans to purchase or lease $220,000 worth of new equipment. If purchased, the equipment will be depreciated on a straight-line basis over five years, after which it will be worthless. If leased, the annual lease payments will be $55,000 per year for five years. Assume Riverside’s borrowing cost is 8%, its tax rate is 35%, and the lease qualifies as a true tax lease. If Riverton purchases the equipment, what is the amount of the lease-equivalent loan? a. $292,884 b. $192,488 c. $197,358 d. $195,70 0 e. $190,237
