Jana Kingston Corporation enters into a lease on January 1, 2017, that does not transfer ownership or contain a bargain-purchase option. It covers 3 years of the equipment’s 8-year useful life, and the present value of the minimum lease payments is less than 90% of the fair value of the asset leased. Prepare Jana Kingston’s journal entry to record its January 1, 2017, annual lease payment of $35,000.
Q: On January 1, 2016, the Millwork Company signed a four-year non-cancelable lease of equipment from…
A: The question is based on the concept of Lease Accounting.
Q: Low Falls Corporation (lessor) entered into a lease agreement on January 1, 2017, to provide Amazon…
A: PV of the asset that the LESSOR should use to compare with the underlying asset’s fair value is the…
Q: Swifty Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does…
A: In this question, we will record lease rent of 44000 at the end of the year and depreciation of…
Q: Low Falls Corporation (lessor) entered into a lease agreement on January 1, 2017, to provide Amazon…
A: Present value denotes the present worth of money by discounting the future cash flows whereas future…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: It will be classified as sale type finance lease transaction: a. The Lease term is for major part…
Q: Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis…
A: Journal entries are prepared to record the financial and non-financial transactions of the business.
Q: On March 31, 2016, Southwest Gas leased equipment from a supplier and agreed to pay $200,000…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Glaze Leasing Company agrees to lease machinery to Johnsen Corporation on January 1, 2017.The…
A: Hey there since multiple sub-parts are posted only the first three sub-parts will be answered.…
Q: Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis…
A: Annual rental receipts = $100,000 Lease term = 5 years Interest rate implicit in the lease = 14%
Q: Rodgers Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years.…
A: Prepare Rodgers' journal entries on January 1, 2020:
Q: On 1 January 2014, Lystra entered into a lease agreement with Trina to rent an asset for a 6 year…
A: As per IFRS 16, The lease liability ia to be measured at commencement date. It is present value of…
Q: Blue Corporation enters into a 6-year lease of equipment on December 31, 2016, which requires 6…
A: Given: Cost of annual payment = $42,200 Residual value = $ 19,500 Cost of the equipment = $ 160,000…
Q: ncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of…
A: calculation of annual rentals Desired Rate of return = 10% Lease Term= 8 years Salvage value = 0…
Q: Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The…
A: A lease is classified as Sale Type lease if the following conditions are satisfied, The lease terms…
Q: On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon…
A: As per the accounting standard, A lease means where an asset owner gives his asset custody to some…
Q: On 1 January 2014, Lystra entered into a lease agreement with Trina to rent an asset for a 6 year…
A: You have posted a multi-part question, so as per our policy only the first three parts are answered.…
Q: Indigo Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years. The…
A: Here we can see that since the does not transfer ownership, contain a bargain purchase option, and…
Q: Carla Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5…
A: A lease is an agreement where an asset is taken on rent and Lessor receives Lease rental in…
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: A lease is a type of agreement or a contract in which resources are given on lease and for which…
Q: On January 1, 2016, Dean Corporation signed a ten-year noncancelable lease for certain machinery.…
A: Depreciation expense on right to use assets and Interest expense in lease accounting: The right to…
Q: On January 1, 2015, Traylor Company, an 80%-owned subsidiary of Parker Electronics, Inc., signed a…
A: Hey, since there are multiple questions posted, we will answer first question. If you want any…
Q: Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The…
A: Year PV factor @ 12% Remarks 1 0.89286 = 1 / 1.12 2 0.79719…
Q: Metlock Corporation enters into a 6-year lease of equipment on January 1, 2017, which requires 6…
A: Lease Receivable: It is a contract under which one party is agreed to rent an asset. This property…
Q: e lease terms, provisions, and related events are as follows: • The lease is noncancelable and has a…
A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
Q: Waterworld Company leased equipment from Costner Company. The lease term is 4 years and requires…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: On January 1, 2016, Renee Corp., a lessee, signed a five-year capital lease for new equipment. The…
A: The last entry made by Renee is an entry for the loss on residual value.
Q: On January 1, 2020, Juris Company leased a building to Jay Company for a ten-year term at an annual…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Kennon Technologies, a dealer of machinery and equipment, leased equipment to Marcos Co. on July 1,…
A:
Q: Prepare Pina’ journal entries on January 1, 2020 (commencement of the operating lease), and on…
A: Pine Corporation's Journal Entries 01-Jan-20 Right of use asset 57721.8 Lease…
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: Current liabilities are those liabilities that need to be paid or settled within a short period of…
Q: Wildhorse Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Oakridge Leasing Corporation signs an agreement on January 1, 2017 to lease equipment to LeBlanc…
A: Lessor and Lessee agreements: A lease of immovable property is a transfer of a right to enjoy such…
Q: Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis…
A: All amounts are in dollar.
Q: eight years and payments are required at the beginning of each year. The following information…
A: A) the lease is a direct-financing type lease from the lessor's point of view or a capital lease…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: SOLUTION- MEANING OF LEASE = It is a Contractual Arrangement Calling for the Lessee(User) to pay the…
Q: On January 1, 2014, KAR Co. . a lessee, signed a 10-year non cancelable lease for a machine…
A: Interest expense for first year of lease commencement = initial measurement of lease liability ×…
Q: Classify the lease from the standpoint of the lessee, stating the reason for the classification.…
A: Millwork's incremental borrowing rate is 12%, and the implicit interest rate used in the lease…
Q: On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment…
A: 1.
Q: Pina Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does…
A: Solution - journal entries…
Q: At January 1, 2016, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: The depreciation expenses for year 1 is calculated by dividing the value of asset with the expected…
Q: Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The…
A: Amount of the equal rental receipts = Amount recover through annual lease payments / Present value…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: It will be classified as sale type finance lease transaction: a. The Lease term is for major part…
Q: Glaze Leasing Company agrees to lease machinery to Johnsen Corporation on January 1, 2017. The…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: CALCULATION OF INTEREST AMOUNT : BEGINNING OF YEAR ANNUAL LEASE PAYMENT INTEREST ON LEASE…
Q: e lease is noncancelable and has a term of 8 years. • The annual rentals are $39,200, payable at the…
A: 1. Requirement 1 Lessor should classify the above lease as finance lease reason: 1. The lessee holds…
Q: At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: 1.
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…
Q: Next Level Assuming that the lease is a sales-type lease from Rexon’s point of view, calculate the…
A: 1) The amount of equal rental receipt = Equipment cost / Annuity factory @ 10% for 8 years Annuity…
Q: Glaze Leasing Company agrees to lease machinery to Johnsen Corporation on January 1, 2017. The…
A: Since you have posted a question with many sub-parts, we will solve three sub-parts for you. To get…
Q: Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of…
A:
Jana Kingston Corporation enters into a lease on January 1, 2017, that does not transfer ownership or contain a bargain-purchase option. It covers 3 years of the equipment’s 8-year useful life, and the present value of the minimum lease payments is less than 90% of the fair value of the asset leased. Prepare Jana Kingston’s
Step by step
Solved in 2 steps with 1 images
- 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.)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.
- Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line methodLessee 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.
- 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.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 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.
- 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 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).On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.