Each of the four independent situations below describes a sales-type lease in which annual lease payments of at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, FV $1) (Use appropriate factor(s) from the tables provided.) Situation 2 1 3 4 Lease term (years) Lessor's and lessee's interest rate Residual value: Estimated fair value 7 7 8 8 10% 12% 11% 11% $68,000 $9,800 $9,800 $68,000 $78,000 Guaranteed by lessee Determine the following amounts at the beginning of the lease: (Round your intermediate and final answer to dollar amount.)
Q: A director must be a shareholder in a corporation. True or False True False
A: Shareholders and directors are two very distinct roles within a limited company. In simple terms,…
Q: Ray, who is single and 22 years old, was unemployed for a few months during 2020. He earned $6,700…
A: Answer: Option A. $0
Q: The assets and liabilities of Matt Wesley Auto Shop are as follows: Cash, S10,000; Accounts…
A: Since basic accounting equation is Total assets = Total liabilities + equity
Q: Which of the following statements is TRUE? a. In net asset acquisition, gain on bargain purchase is…
A: As per IFRS 3 Acquisition Method shall be used for accounting business combination. As per the IFRS…
Q: The assets and liabilities of Matt Wesley Auto Shop are as follows: Cash, S10,000; Accounts…
A: Introduction: Accounting equation: Sum of Liabilities and owner equity value derives the Total…
Q: 9. Which of the following will not appear in a cash budget in the same month? A. Cash sales B.…
A: Cash budget is the estimation of cash receipts and cash payments for the particular period. It helps…
Q: The cost of equipment is P500,000 and the cost of installation is P30,000. If the salvage value is…
A: As requested to answer Part A so we are answering only Part A .
Q: Which of the following is most likely to be an intangible asset with an indefinite life? Multiple…
A: Assets are the rights and resources being held by the business for the purpose of use or for the…
Q: martha invest $5300 at a rate of 6 1/4%. find how long it will take for his investment to earn $410…
A: Basic Concept of Interest Calculation
Q: The following has 1. An amount of irrecoverable.
A: Assets are resources that are controlled which results from prior transactions that are expected to…
Q: A company manufactures three related, but different, products. These are dishwashers, washing…
A: Direct labor variance reflects the difference between the actual cost incurred by the company on…
Q: Jenner Company developed its annual manufacturing overhead budget for its master budget for 2008 as…
A: "Since you have asked multiple questions, we will solve first question for you. If you want any…
Q: Marie Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000 general loan…
A: Cost of building will include the expenses incurred on the construction of building and interest on…
Q: During 2020, Mowgli Company incurred the following costs: R&D services performed by Elijah Company…
A: Research & Development Cost- The costs incurred in developing new products or processes are…
Q: Cash 56500 Receivables short term 25800 Inventory Payables short term Payables long term salaries…
A: Formula used: Current ratio = Current Assets / Current liabilities Division of current liabilities…
Q: If you approach a decision in the spirit of 'trial and error', you often O a. irreversible Ob. O b.…
A: A type of learning in which the organism successively tries various responses in a situation,…
Q: Selected information from the separate and consolidated statements of financial position and…
A: The percent of non-controlling interest ownership in S Company as of December 31, 2019.
Q: Vet-Pro, Ic., produces a veterinary grade anti-anxiety mixture for pets with behavioral prob- lems.…
A: Variance refers to the difference of budgeted and actual revenues and expenditures.
Q: ga Store (Pty) Ltd has a wholesale section that conducts some of their business on credit.…
A: Assets are resources that are controlled which results from prior transactions that are expected to…
Q: How much is Vancouver Company's amortization expense and franchise fee expense for the year 2020?
A: On April 1, 2020, Vancouver Company purchased from Sunbucks Company (franchisor), a franchise to…
Q: Kator Co. is a manufacturer of industrial components. One of their products that is used as a…
A: The special order is acceptable if Total manufacturing variable costs can be covered from the price…
Q: At the end of the prior year ending on December 31, Year 1, O'Connor Company's records reflected the…
A: A journal entry is often recorded in the main ledger; however, it may also be entered in a…
Q: Flexible Budget for Selling and Administrative Expenses for a Service Company Daybreak Technologies…
A: The question is based on the concept of Cost Accounting.
Q: operating costs wer
A: Given as, Revenue $25 Operating costs $4.75 $3,150
Q: Q1 Mention in brief the results of measures undertaken to bring about reforms in state finance under…
A: Answer:- Taxation system:- Taxation system is the process through which the government collects the…
Q: Štart $1.00 2|3 4|5 89 10 TV Key Assumptions Construction cost ($) Loan ($) Loan interest rate Loan…
A: Net Present Value=(Present Value of Cash Inflows-Present Value of Cash Outflows) IRR is a rate at…
Q: Consider the following information pertaining to OldWest's inventory: Net Realizable Value Quantity…
A: Formula: Inventory value = Quantity x Cost or NRV which ever is lower
Q: What is the wording for a disclaimer of opinion?
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Equipment Purchase price was $ 500000 on January 01, 2018. Salvage value at the end of the 10 Years…
A: Formulas: Accumulated depreciation = Annual Depreciation x No. of years life spent on the assets…
Q: Roger Company’ sells one product, and has provided the following variable and fixed estimates for…
A: Solution:- a)Calculation of the amount shown for revenue under the flexible and planning budget for…
Q: Star City is considering an investment in the community center that is expected to return the…
A: Solution:- a)Calculation of Net present value If appropriate discount rate 25% as follows under:-
Q: At December 31, 2019, the Blue Agave Company had a current deferred tax asset of $60,000, arising…
A: What is meant by Journal entries? It is the first step to record the financial transactions in the…
Q: On February 14, AA and BB formed a partnership and contributed the following assets at historical…
A: Summary of case : AA has contributed in form of cash and furniture and fixtures and BB contributes…
Q: AA and BB entered into a partnership on March 1, 2022, by investing the following assets: AA BB…
A: A partnership is an agreement between two or more partners where partners are agreed to work…
Q: Prepare Trial Balance Cash Accounts Receivable Capital Withdrawals Service Fees Rent Expense $1,200…
A: Trial balance consists of list of all general ledger accounts.The total debits of trial balance…
Q: Using the information in AA8, how much is the total amount of Retained Earnings? P 150,000 P 100,000…
A: Retained earnings means the amount that is left after paying all the expenses and amount that…
Q: Companies cannot as a general rule reduce the capital of the business. However, there may be a class…
A: Share capital is the capital which has been contributed by the shareholders of the company by the…
Q: Average total assets (excluding long-term inve
A: The Asset turnover ratio compares the worth of a company's sales or revenues to the value of its…
Q: the auditor decided to render analytical procedure in testing the reasonableness of the inventory…
A: The method of retail inventory refers to the accounting process which is used to estimate the…
Q: partners who share profits and losses in the respectively. On January 1, 2021, their respective…
A: When a new Partner is added to a Partnership firm for an agreed percent of share in the total…
Q: A list of expenses involved in the production of custom, professional lacrosse sticks are shown.…
A: Direct manufacturing costs are those costs which the business has incurred and which forms a direct…
Q: ava Lake Inc. bottles and distributes sp ake reacquired 38,700 shares of its con C. sold 33,500 of…
A: Journal is the book of original entry in which all the financial transactions of the business are…
Q: lease term is 6 years, with equal annual rental payments of $3,933 at the beginning of each year.…
A: Lease Accounting
Q: DEBIT CREDIT 1.Equipment Capital 1. The owner invests equipment in the business. 2. The company…
A: Introduction: Each and every business transactions affects the minimum two Accounts. One is debit…
Q: What distinguishes an income tax from other taxes?
A: Income tax is simply a tax on an employee's wage or salary. While this might sound similar to…
Q: On 1ª January, 2016 Sadhan Sen of Sodepur sent 1,000 units of silk goods to Biren Bose of Berhampur…
A: A log book is used to record a commercial transaction in the accounting records of a corporation. A…
Q: How is the Non-Controlling Interest displayed in a consolidated balance sheet? a. As a separate…
A: Introduction:- Non-controlling interest occurred in business combination. The parent acquires less…
Q: Closing Entries (Net Income) Use the following partial listing of T accounts to complete this…
A: The closing entries are prepared at year end to close the temporary accounts of the business at year…
Q: Your savings account pays 6% annually. Assuming this interest rate remains constant, how much do you…
A: If the annual saving interest is 6%. let's say the amount invested is X So total amount after 4…
Q: n from the separ ome of P Compa as follows: ial position acco ..... ...
A: Given The percent of non-controlling interest ownership in S Company as of December 31, 2019.
consider $175,000 as lease payment
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- 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.In the third year of a 6-year finance lease, the portion of the lease payment applicable to the reduction of the lease liability should be: a. less than in the second year b. more than in the second year c. the same as in the fourth year d. more than in the fourth yearUse 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. Assume that Garvey is required to make payments on December 31 each year.
- 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.Use the information in RE20-1. Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.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.
- Sales-Type Lease with Guaranteed Residual Value Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2017. The lease is appropriately classified as a sales-type lease. The lease terms, provisions, and related events are as follows: The lease is noncancelable, has a term of 8 years, and has no renewal or bargain purchase option. The annual rentals are 65,000, payable at the end of each year. The interest rate implicit in the lease is 15%. Darwin agrees to pay all executory costs directly to a third party. The cost of the equipment is 280,000. The fair value of the equipment to Calder is 308,021.03. Calder incurs no material initial direct costs. Calder expects that it will be able to collect all lease payments. Calder estimates that the fair value at the end of the lease term will be 50,000 and that the economic life the equipment is 9 years. This residual value is guaranteed by Darwin. The following present value factors are relevant: PV of an ordinary annuity n = 8, i = 15% = 4.487322 PV n = 8, i = 15% = 0.326902 PV n = 1, i = 15% = 0.869565 Required: 1. Determine the proper classification of the lease. 2. Prepare a table summarizing the lease receipts and interest income earned by Calder for this lease. 3. Prepare journal entries for Calder for the years 2019, 2020, and 2021. 4. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the present value of next years payment approach to classify the lease receivable as current and noncurrent. 5. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the change in present value approach to classify the lease receivable as current and noncurrent.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.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?
- Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 10% 11% 9% 12% Fair value of lease asset $ 59,000 $ 359,000 $ 84,000 $ 474,000 Lessor's cost of lease asset $ 59,000 $ 359,000 $ 54,000 $ 474,000 Residual value: Estimated fair value 0 $ 59,000 $ 16,000 $ 32,000 Guaranteed fair value 0 0 $ 16,000 $ 37,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations.Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 10% 11% 9% 12% Fair value of lease asset $ 65,000 $ 365,000 $ 90,000 $ 480,000 Lessor's cost of lease asset $ 65,000 $ 365,000 $ 60,000 $ 480,000 Residual value: Estimated fair value 0 $ 65,000 $ 22,000 $ 34,000 Guaranteed fair value 0 0 $ 22,000 $ 39,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. I have got all answers except…Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor’s implicit rate of return. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Situation 1 2 3 4 Lease term (years) 5 8 6 9 Lessor's rate of return 9% 10% 8% 11% Fair value of lease asset $ 69,000 $ 369,000 $ 94,000 $ 484,000 Lessor's cost of lease asset $ 69,000 $ 369,000 $ 64,000 $ 484,000 Residual value: Estimated fair value 0 $ 69,000 $ 26,000 $ 38,000 Guaranteed fair value 0 0 $ 26,000 $ 43,000