Fitbit Ltd has leased a machine on the following terms: Date of entering lease 1 July 2019 Duration of lease 5 years Life of asset 6 years Unguaranteed residual value $40,000 Lease payments inception (at the start) $60,000 Annual payments (5) $65,000 Implied rate 11.0 % Required: Determine the Fair Value (rounded off) of the leased asset.
Q: East Company leased a new machine from North Company on January 1, 2021 under a lease with the…
A: So East Company has leased Machine from North Company on Jan1, 2021 - This is a Finance Lease Type…
Q: Determine the amount of lease payment that the lessor would require to lease the asset to an outside…
A:
Q: On January 1, 2019, AA Company leased a plastic molding machine from BB Company. Additional…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: On 1st January 2019, LMN SAOG entered an agreement to lease an item of plant from a manufacturer for…
A: The answer for the multiple choice question and relevant explanation are presented hereunder :
Q: Kingbird Company leased equipment from Costner Company, beginning on December 31, 2019. The lease…
A: The lease is a method that is used by a company to acquire a capital asset for a long period of…
Q: On December 31, 2018, Zonrox Company leased a new machine from Oxide Corporation. The following data…
A: The question is related to Accounting for Lease. The lease Laibility will be recognized at Present…
Q: Macinski Leasing leases a new machine to Sharrer SA. The machine has a cost of €70,000 and fair…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: On December 31, 2018, ZonrOx Company leased a new machine from Oxide Corporation. The following data…
A: SOLUTION- NOTE= ANNUAL MAINTENANCE COST OF P35000 AND PAYMENT TO LESSOR TO OBTAIN LONG LONG TERM…
Q: Sarh Pieces Inc. creates aluminum alloy parts for commercial aircraft. In a recent transaction Sarh…
A: NOTE : As per BARTLEBY guidelines, when sub parts of the question are given, then first three sub…
Q: I MISS HIGH SCHOOL INC. leased a machine from ANYARE SA COLLEGE LTD. on January 01, 2019. The first…
A: Annual lease payment = Total annual payments - annual payment for repairs and maintenance = 33000 -…
Q: On April 1, 2021, Xai Company acquired a machine by signing a four-year lease. Annual rentals of…
A: Depreciation is calculated based on the useful life In case of lease, the useful life of the leased…
Q: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The…
A: a.Compute the amount of the lease receivable.
Q: Macinski Leasing leases a new machine to Sharrer SA. The machine has a cost of €70,000 and fair…
A: Prepare the journal entry in the books of M at the commencement of lease as follows:
Q: On January 1, 2021, Elle Company acquired a machine by signing a five-year lease. Annual rentals of…
A:
Q: Lease payments: $5000 at lease
A: The correct answer is 20%rounded off to0 decimal places Calculation Implicit rate of return =…
Q: EQUIRED: a.) At what amount should Diana record the leased asset at January 1,2020? b.) Prepare the…
A: Lease Payment 86,680 Lease Term 5 year Unguaranteed Residual Value 50000 fair value of the…
Q: On December 31, 2020, Naruto Company leased a new machine from Sasuke with the following pertinent…
A: A lease contract is a written agreement between two parties that details the lease conditions and…
Q: Jolo Company is in the business of leasing new sophisticated equipment. As lessor, Jolo Company…
A: Here student asked for multi sub part question we will solve first three sub part question for you.…
Q: On January 1, 2020, ABC Company leased a building with the following information: Annual rental…
A: It is given that: Annual rent at the end of each year = $1,000,000 Initial direct cost - $400,000…
Q: Lazy Company leased an equipment with useful life of 6 years on January 1, 2020 for period of 5…
A: Given, Lazy company leased an equipment Useful life of equipment = 6 years On January 1, 2020 Lease…
Q: Lessee Company leased a machine on January 1, 2019 with the following pertinent information:…
A: Information given in the question Implicit interest rate - 10% useful life of the…
Q: Determine the Fair Value (rounded off) of the leased asset.
A:
Q: On December 31, 2018, Welington Company leased a new machine from Daniel with the following…
A: Lease represents the agreement between two parties (known as lessor and lessee). Lessor provides the…
Q: Honesty Company acquired a machine by signing a five-year lease on January 1, 2021. Annual rentals…
A: The requirement is to compute the depreciation expense to be recognized in 2021 for the machine…
Q: Fitbit Ltd has leased a machine on the following terms:Date of entering lease 1 July 2019Duration of…
A: A lease is a contractual agreement where one party known as lessor grants the right to use an asset…
Q: Kingbird Company leased equipment from Costner Company, beginning on December 31, 2019. The lease…
A: Date Particulars Debit Credit 12/31/19 Right - of - use asset 320,000 To Lease…
Q: On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of…
A: Cost of sales will be calculated as the carrying amount of leased asset less present value of…
Q: On 1st January 2019, LMN SAOG entered an agreement to lease an item of plant from a manufacturer for…
A: Lease is a contract between two parties in which one party provides right to use asset to other…
Q: January 1, 2022, Tiktok Company leased a heavy equipment to be used in its construction business.…
A: The right-of-use asset refers to the asset taken on the lease by the lessee entity. It is recognized…
Q: On January 1, 2020, Naruto Company leased a new machine from Sasuke Company. The following data…
A: At the inception of the lease, in the books of lessee, lease liability is recorded at present value…
Q: On 1st January 2015, Trademart SAOG entered into an agreement to lease an item of plant from a…
A: The question is related to Accounting for lease. The lessee will record the asset and leased…
Q: Von Company leased a piece of equipment to Sam Company on April 1, 2021. The lease is appropriately…
A: Total present value of lease liability = Present value of annual lease payment + Present value of…
Q: Hurricane Company leased an excavator on January 1, 2018. According to the terms of the agreement,…
A: Hurricane company leased an excavator on 01.01.2018 Lease rent per annum = 20000 TL for 6 years…
Q: On January 1, 2019, Tharn Corporation leased a machinery from Type Company on a five-year lease term…
A: The value of the right to use asset is equal to the fair value of lease liability at the inception…
Q: Myro Company leased a new machine from Myie Corp. on May 1, 2014 under a lease with the following…
A: Lease Accounting: Lease accounting is an accounting system used to record the financial impact due…
Q: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on 1 January 2019. The…
A: Hi student Since there are multiple subparts, we will answer only first three subparts. If you want…
Q: Cullumber Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020.…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: YK Incorporated leased road building equipment from Bajan Leasing on January 1, 2021. Bajan…
A: It is given that, the lease term is of 2 years with 4 semi-annual lease payments. The fair value of…
Q: On January 1, 2021, Elle Company acquired a machine by signing a five-year lease. Annual rentals of…
A: Right-of-Use Machine shall be measured at Present Value of Future lease payments value upon Initial…
Q: itbit Ltd has leased a machine on the following terms:Date of entering lease 1 July 2019Duration of…
A: Lease: It can be defined as a contractual agreement whereby one party, known as the lessor grants…
Q: Teal Mountain Company leased equipment from Costner Company, beginning on December 31, 2019. The…
A: Under straight line method of depreciation, Depreciation Expense = (Original cost - Salvage value)…
Q: Fitbit Ltd has leased a machine on the following terms: Date of entering lease 1 July 2019 Duration…
A: Lease is a Agreement in which one partly allows other party to use a particular assets in return of…
Q: North Blue Company leased a new copier from Kixko Company on June 1, 2019, under a lease with the…
A: Amount of right-of-use asset = Annual rental payable at the beginning of each lease year x Present…
Q: I MISS HIGH SCHOOL INC. leased a machine from ANYARE SA COLLEGE LTD. on January 01, 2019. The first…
A: Annual lease payment = Total annual payments - annual payment for repairs and maintenance = 33000 -…
Fitbit Ltd has leased a machine on the following terms:
Date of entering lease 1 July 2019
Duration of lease 5 years
Life of asset 6 years
Unguaranteed residual value $40,000
Lease payments inception (at the start) $60,000
Annual payments (5) $65,000
Implied rate 11.0 %
Required:
Determine the Fair Value (rounded off) of the leased asset.
Show your work
Step by step
Solved in 2 steps
- 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.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.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.
- 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?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).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.
- 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.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.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.
- 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.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.)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. 47,910