In Intermediate Accounting by Whalen on Cengage, chapter 20, homework question 4, how do you calculate the selling price? Sale type lease for 8 years. Lease pmt due at the end of the year $32,000/yr. 14% interest. Cost of the equipment is $110,000 and estimate fair value at the end of the lease is $20,000.
Q: The following items are related to the lease transaction between Tessie Company and Tessor Company:…
A: As per IFRS 16, Leases, the right of use asset in the books of the lessee is recognized as the sum…
Q: Major Corp. leased a computer to Minor Corp. on January 1, 2020. The terms of the lease are as…
A: Lease is an agreement under which the one party (lessee) acquires the right to use the underlying…
Q: Sur Food Corp., leased machine from AL-Shrouq Corp. the lease agreement for the O.R 1,600,000 (fair…
A: Lease agreement is a type of contract between two parties where one party provides the asset to…
Q: Lease Payments Montevallo Corporation leased equipment from Folio Company. The lease term is 10…
A: Present value : It is the current value of the future cash flow which discounts at the discounted…
Q: On 1/1/21, Hall Inc entered into a lease agreement with Oates Co. Hall leased a machine from Oates…
A: SOLUTION- 1- DATE INSTALLMENT PAYMENT INTEREST EXPENSE LEASE AMORTIZATION LEASE CARRYING VALUE…
Q: Consider the following terms of a lease. 1. The lease term is 5 years. The lease is noncancelable…
A: Lease classify as sale type lease means it is a financial lease where lessor has given right to use…
Q: Jackie Chan Leasing signs an equipment lease contract with Chris Tucker on January 1, 2020. The…
A: Answer - Working Note: Annual Lease Payment: Particulars Amount Fair value of asset…
Q: Calculate the finance cost recognized in the statement of comprehensive income for the year ended…
A: The lease is a written contract between the two parties. In the lease, one party rents its machinery…
Q: The following items are related to the lease transaction between Tessie Company and Tessor Company:…
A: As per IFRS 16, Leases, the right of use asset in the books of the lessee is recognized as the sum…
Q: On January 1, 20x7, Babson, Inc., leased two automobiles for executive use. The lease requires…
A: Leases is a form of contract or arrangement between two parties under which one party provides it's…
Q: The business owner terms of a lease contract are as follows: Annual lease = 1,500,000 pesos, 1st…
A: Annual lease = 1,500,000 Growth rate = 10% Lease period = 4 Years Interest rate = 14%
Q: On January 01, 2012, PC Options sold equipment to PC Madness and simultaneously leased it back.…
A: The question is related to sale and lease back. In sale and lease back transactions (operating…
Q: A Type A lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term,…
A: Compute the outstanding balance:
Q: The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan…
A: (iii) Following are the recording of first year depreciation in the books of T’s company:
Q: 3. On January 1, 20x1, Lessee enters into a 5-year lease of equipment. Annual rental is P300,000…
A: The question is related to the Accounting for Lease. The lessee record the lease assets and leased…
Q: On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000…
A: The lease is a type of financing in which the owner of the asset provides the right to use the asset…
Q: On January 1, 20x1, Entity Y leases out an equipment to Entity X. Information on the lease is as…
A: The gross investment is the total amount that is made for buying the capital goods, for investing…
Q: 3. On January 1, 20x1, Lessor enters into a 4-year lease of equipment that has a remaining useful…
A: Operating Lease: An operational lease is a contract that allows you to use and run a piece of…
Q: On January 1, 2020, EF Corp. leased an equipment for 5 years at semi-annual rental of ₱325,000…
A: Data given:: N= 5 years (semi-annual) Period = 5*2 = 10 Lease payment = ₱325,000 Working Note #1…
Q: lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a…
A:
Q: please show the solution
A: A lease is a financing option where there are two parties lessor and lessee. The lessor leases an…
Q: On 12-31-20, C leased a machine with a useful life of 6 years. The noncancelable lease agreement…
A: A lease agreement is an agreement where the lessor transfers the right to use the asset to the…
Q: Reporting Finance Lease, Gua eed Résic Lessee Mac Leasing Company (lessor) and Ash Corporation…
A: Original Liability at the commencement date= $11923 X 4.62 [ie: PVAF (8%, 6yr)]…
Q: The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: What is the PV of lease payment. Record the lease on June 30, year 1
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period…
Q: Huskies Together Company leased equipment from Caterpillar, beginning on December 31, 2020. The…
A: For Year 2020 Journal Entries - Huskies Together Company Date Particulars Debit Credit…
Q: ABC Company leases out an equipment under direct finance lease. There is no residual value nor…
A: Solution: Annual rental payment = Fair value of equipment / PVAD of 1 at 8% for 5 periods =…
Q: Farm Ltd leases some parcels of land from their owner for a period of 10 years at a time. The lease…
A: Calculation of Present Value of Lease payments: The present value of Lease payments is the aggregate…
Q: Terms of a lease agreement and related facts were: a. The lease asset had a retail cash selling…
A: 1. Record journal entries in the books of lessor for three years term operating lease as shown…
Q: At the beginning of current year, an entity sold an equipment with remaining life of 10 years and…
A: 1) Initial lease liability = 800,000 × 3.17 = 2,536,000 Correct option is (a).
Q: -On December 30, 20x8, Rafferty Corp. leased equipment. Annual lease payments of P20,000 are due…
A: Given , Initial lease obligation = P135,000 Annual lease payments = P20,000 Lease…
Q: ABC Inc. leases equipment for 10 years. The annual lease payment is $8,000. The interest rate for a…
A: Financial Lease is a form of lease agreement in which the lessee buys the asset with the help of…
Q: On January 1, 20x1, Sunset Co. leased a machine from April, Inc. Information on the lease is as…
A: Since you have posted a question with multiply subparts, we will solve the first three subparts for…
Q: On January 1, 20x1, Entity Y leases out a piece of equipment to Entity X. Information on the lease…
A: The question is related to Accounting for Lease. The Finance Income will be calculated by deducting…
Q: . Jackie Chan Leasing signs an equipment lease contract with Chris Tucker on January 1, 2022. The…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: ABC Company leases out an equipment under direct finance lease. There is no residual value nor…
A: Solution: Present value of lease payment = Fair value of equipment / PVAD of 1 at 8% for 5 periods =…
Q: Pen Brush Which of these contractual terms would lead a company to account for a lease contract…
A: Capital Lease Method: The capital lease method is an accountiing approach that posts a company's…
Q: On January 01, 2012, PC Options sold equipment to PC Madness and simultaneously leased it back.…
A: Considering facts of the case, Seller-lessee and buyer-lessor account for the transaction as a sale…
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: Li Zi Company entered into a lease of building on January 1, 2020. The lease contract provided the…
A: Journal entries are the entries to be recorded in the accounting books of the business for all the…
Q: On January 1, 2021, Small company leased a machine from Huge Company. The following information…
A: The lease liability in the books of the lessee on the reporting date is reported at the present…
Q: Juliet Company is in the business for leasing new sophisticated equipment. As lessor, Juliet Company…
A: Following information are summarized for calculation of required information: Commencement of lease…
Q: Prepare table of amortization and journal entries for the entire lease term.
A:
Q: King Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease…
A:
Q: On January 1, 20x1, Lessee enters into a 4-year lease of heavy machinery. Annual rental is P200,000…
A: As per IFRS 16, the lease liability and ROU assets in the books of the lessee are recognized at the…
In Intermediate Accounting by Whalen on Cengage, chapter 20, homework question 4, how do you calculate the selling price?
Sale type lease for 8 years. Lease pmt due at the end of the year $32,000/yr. 14% interest. Cost of the equipment is $110,000 and estimate fair value at the end of the lease is $20,000.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 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.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).
- 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.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.)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.
- 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.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.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.
- 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.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. Assume that Garvey is required to make payments on December 31 each year.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.
