Please answer E21-14. E21.14 (LO 2) (Lessee Entries) Use the information for the Phelps/Walshlease in E21.13. In this instance, however, Walsh is unaware of the implicit rateused in the lease by Phelps and has an incremental borrowing rate of 9%.InstructionsHow would your answer to E21.13(a) change? E21.13 (LO 2, 3) (Lessee-Lessor Entries, Sales-Type Lease; GuaranteedResidual Value) Phelps plc leases a building to Walsh Ltd. on January 1, 2022.The following facts pertain to the lease agreement.1. The lease term is 5 years, with equal annual rental payments of £4,703 at thebeginning of each year.2. Ownership does not transfer at the end of the lease term, there is no bargainpurchase option, and the asset is not of a specialized nature.3. The building has a fair value of £23,000, a book value to Phelps of £16,000,and a useful life of 6 years.4. At the end of the lease term, Phelps and Walsh expect there to be anunguaranteed residual value of £4,000.5. Phelps wants to earn a return of 8% on the lease, and collectibility of thepayments is probable. This rate is known by Walsh.Instructionsa. How would Phelps (lessor) classify this lease? How would Phelps initiallymeasure the lease receivable, and how would Walsh initially measure thelease liability and right-of-use asset?

Capital Lease - It is an agreement where lessor has agreed to transfer ownership of the assets to…

E21.14 (LO 2) (Lessee Entries) Use the information for the Phelps/Walsh lease in E21.13. In this instance, however, Walsh is unaware of the implicit rate used in the lease by Phelps and has an incremental borrowing rate of 9%. Instructions How would your answer to E21.13(a) change?

E21.14 (LO 2) (Lessee Entries) Use the information for the Phelps/Walsh lease in E21.13. In this instance, however, Walsh is unaware of the implicit rate used in the lease by Phelps and has an incremental borrowing rate of 9%. Instructions How would your answer to E21.13(a) change?

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 5RE: Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the...

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Eubank Company, a lessee, enters into a lease agreement on January 1, 2021, for equipment. The following data are relevant to the lease agreement: - The term of the noncancelable lease is 4 years. Payments of $978,446 are due on January 1 of each year. The first payment is January 2021. - The fair value of the equipment on January 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with nosalvage value. - Eubank uses the straight-line method of depreciation. - Eubank’s implicit rate is 8%. - This will be treated as a finance lease (Lessee Perspective). Instructions: Prepare the journal entries on Eubank’s books (lessee) that relate to the lease agreement for the following dates, you do not need to create an amortization schedule. a. January 1, 2021. b. December 31, 2021.
Which of the following lease arrangements would most likely be accounted for as a finance lease by the lessor if it is under US GAAP instead of IFRS? a. The lease agreement runs for 15 years and the economic life of leased property is 20 years. However, the title is not transferred to the lessee at the end of the lease term. b. The present value of future payments is P73,600 when the fair value of the property is P80,000 at the end of the first lease year. c. The lessee shoulders the gain or loss from fluctuation in the fair value of the underlying asset. d. The lessee may renew the two-year lease for two additional years; originally the lease payments were P10,000 monthly. Renewed lease term calls for P11,000 monthly rental payment.
On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…
On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…
On January 1, 2021, Pharoah, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2021 is $5600000; however, the book value to Holt is $4550000.(c) The building has an estimated economic life of 10 years, with no residual value. Pharoah depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Pharoah’s incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Pharoah, Inc.(f) The yearly rental…
On January 1, 2021, Sunland, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2021 is $5700000; however, the book value to Holt is $4650000.(c) The building has an estimated economic life of 10 years, with no residual value. Sunland depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Sunland’s incremental borrowing rate is 12% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Sunland, Inc.(f) The yearly rental…
On January 1, 2021, Sandhill, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2018 is $5800000; however, the book value to Holt is $4750000.(c) The building has an estimated economic life of 10 years, with no residual value. Sandhill depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Sandhill’s incremental borrowing rate is 10% per year. Holt Warehouse Co. set the annual rental to insure a 9% rate of return. The implicit rate of the lessor is known by Sandhill, Inc.(f) The yearly rental…
P21-15 (Please use the latest IFRS accounting standards to answer the question, and take note that lessee do recognise depreciation) Cleveland Group leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract starting January 1, 2022. Terms of the lease require payments of R$48,555 each January 1, starting January 1, 2022. The crane has an estimated life of 7 years, a fair value of R$240,000, and a cost to Cleveland of R$240,000. The estimated fair value of the crane is expected to be R$45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and the crane is not a specialized asset. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is probable. Abriendo's incremental borrowing rate is 8%, and Cleveland's implicit interest rate of 8% is known to Abriendo. Instructions a. Identify the type of lease involved and give reasons for your…
On January 1, 2021, Blossom, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2018 is $6500000; however, the book value to Holt is $5450000.(c) The building has an estimated economic life of 10 years, with no residual value. Blossom depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Blossom’s incremental borrowing rate is 12% per year. Holt Warehouse Co. set the annual rental to insure a 11% rate of return. The implicit rate of the lessor is known by Blossom, Inc.(f) The yearly rental…
Hi, I cannot figure out the amount of 44,564.86 of amortization expense. would you help me out? thanks E20-4 Lessee Accounting for Finance Lease LO 20.4 On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment from Stone Inc. Concord agrees to make lease payments of $47,500 per year. Additional information pertaining to the lease is as follows: The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due every January 1, beginning January 1, 2019. The fair value of the manufacturing equipment on January 1, 2019, is $150,000. The equipment has an economic life of 7 years. Concord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term. Concord considers it probable that it will have to pay $5,000 cash at the end of the lease terms to satisfy this residual value guarantee. Concord Corp. depreciates similar assets using the…
The following information pertains to a leased contract entered into by Blue Company, lessee, on January 1, 2018: Lease term, 5 years, useful life of the leased asset, 20 years; Annual rental payable at year-end, P800,000 and the implicit rate is10%. The lease contract contains an option for Blue Company to extend for another 5 years but at the commencement of the lease, the exercise of the option is not reasonably certain, however on January 1, 2021, Blue Company decided to extend the lease term by another 5 years. However, the annual rental starting 2023 (6th year) will be P1,000,000 and the new implicit rate is 8%. How much is the depreciation expense in 2021?
The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system. Commencement date October 1, 2020 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at October 1, 2020 $313,043 Book value of asset at October 1, 2020 $280,000 Residual value at end of lease term –0– Lessor's implicit rate 8% Lessee's incremental borrowing rate 8% Annual lease payment due at the beginning of each year, beginning with October 1, 2020 $62,700 The collectibility of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease…