Journalize the inception of the lease and the first payment made by PMA in the books of GP (Lessee) if rate of interest in the lease is 8%.
Q: Yel Co. has a bonus agreement which provides that the general manger shall receive an annual bonus o...
A: Solution.. Manager bonus = P280,000 Manager bonus = 10% of income after bonus and tax
Q: July 31 (there are 3 boxes) plz help with July 31 journal entries (3 lines in total)
A: Journal entries refers to the official book of a company which is used to record the day to day tran...
Q: Garden Sales, Incorporated, sells garden supplies. Management is planning its cash needs for the sec...
A: A budget is a predefines estimates of all the income and expenses to be earned and incurred during a...
Q: QUESTION 3 On January 1, 2016, a company placed into capitalized cost of $1,200,000. The equipme $30...
A: Introduction:- Straight line method:- It is simple method of depreciation. In this method same amoun...
Q: Consider a 15 year 6.5% semi-annual coupon bond whose duration is approx. 9.50 years when required r...
A: Immunization of bond is used whenever the risk of the investor for the interest rate risk is to be r...
Q: International Cargo Inc. which is subjected to 20% tax rate employs residual dividend policy to its ...
A: To compute the dividend yield, it is necessary to calculate those variables that are major indicator...
Q: A company that operates within a country whose legal system and laws relating to dividend policy are...
A: b. Increase plowback ratio
Q: At the end of the current year, fees of $4,430 have been earned but have not been billed to clients....
A: ANSWER THE ADJUSTING ENTRY FOR THE END OF THE CURRENT YEAR IS ACCOUNT RECEIVABLE Dr $4430 T...
Q: The "Budget" column of a flexible budget report reflects: budgeted costs at the budgeted level of ac...
A: Solution Concept Flexible budget Flexible budget is a budget which is prepared by changing the varia...
Q: Ms. Magan Dah and her sister, Ms. Supla Dah got into the cakes and pastries business almost by accid...
A: Earnings before interest and taxes indicate the company's profitability and are calculated by deduct...
Q: Crowdfunding is not a form of raising fund for company’s capital budgets since they are less known t...
A: Crowdfunding is not a form of raising fund for company’s capital budgets since they are less known...
Q: Required: • Posting • Trial Balance • Statement of Financial Position
A: Hi student Since there are multiple subparts, we will answer only first three subparts. If you want ...
Q: The entity has a long -term line of credit Matthew Co. includes one coupon in each bag of dog food i...
A: The correct answer is given in the following steps for your reference
Q: How much of Ridge Road’s $3,700,000 payment for Sauk Trail is attributable to goodwill? What amount...
A: Solution:- Given, On January 1,2020, Ridge Road company Acquired 25% of the voting shares of Sauk T...
Q: On January 1, 2019, Pharoah Inc., a construction company, leased an excavator from Leaselt Inc. The ...
A: The right of use asset is calculated as present value of annual lease payments and residual value at...
Q: Peter acquired 80% of the outstanding ordinary shares of Simon on January 2, 20x1. During 20x1, Pet...
A: Workings: 1) Computation of unrealized profit on downstream transactions: Beginning Unrealized prof...
Q: E6.8 (LO 2), AP Lisa Company had 100 units in beginning inventory at a total cost of $10,000. The co...
A: "Since you have posted a question with multiple sub parts, we will solve first three sub parts for y...
Q: 3. What were the company's predetermined overhead rates in the Molding Department and the Fabricatio...
A: Department Plantwide Overhead Rate The department predetermined overhead rate is set at the beginnin...
Q: How much gain or loss will Bill recognize on the distribution? What is Bill's basis in the inventory...
A: The calculation of gain or loss on distribution and basis in inventory and capital asset is shown he...
Q: On January 1, 2021, Mustas issued new bonds with face amount of P 10,000,000 for P 10,800,000. Musta...
A: Loss on bonds retirement = Unamortized discount on the existing bonds + call premium on payment + di...
Q: ation expense that Scrimshander must recognize on the cargo sh of the cargo ship as of December 31, ...
A: Under the straight line method , the annual depreciation expense is constant . It is calculated by d...
Q: U.S. $ EQUIVALENT CURRENCY PER U.S. $ Polish Zloty .2984 3.3516 Euro 1...
A: Disclaimer: “Since you have posted a question with multiple sub-parts, we will solve first three sub...
Q: Practice: Landscape Company sells a mower it used in its business. Acquisition (historical) cost was...
A: Note: Since we answer only one question, We’ll answer the first question since the exact one wasn’t ...
Q: and its stock price is P32. per share. What is Alessandra Company market/book Alessandra Company has...
A: Calculation of market to book ratio are as follows
Q: Briefly discuss double taxation
A: Taxes are the amount of obligations that needs to be paid by the individual to the government. Taxes...
Q: The president of Christmas Corporation donated a building to Tuesday Corporation. The building had a...
A: Introduction: Journals: Recording of a business transactions in a chronological order. First step in...
Q: QWE Corporation has the following information available for March of the current year. Beginning Wor...
A: "Since you have posted a question with multiple sub parts, we will solve first three sub parts for y...
Q: tions Balance per bank $14,385 Balance per company records 11,200 Bank service charges 60 Deposit in...
A: A bank reconciliation statement is a summary of business and corporate operations that reconciles th...
Q: Exercise 8-2 Recording costs of assets LO C1 Cala Manufacturing purchases land for $367,000 as part ...
A: The question requires a single journal entry for the transaction of cash paid . Cash has been paid f...
Q: Johnny Lopez Construction Company is a general contractor that specializes in custon residential hou...
A: Bid price is the estimated cost to be changed the bid price includes the estimated direct cost and t...
Q: Sydney Retailing (buyer) and Troy Wholesalers (seller) enter into the following transactions. May 11...
A: The journal entries are prepared to keep the record of day to day transactions of the business.
Q: Tell whether each of the following accounts is part of net sales, cost of goods sold, operating expe...
A: Explanation- All are in different different account according to their nature.Here is the nature of ...
Q: Balerio Corporation's relevant range of activity is 8,000 units to 12,000 units. When it produces an...
A: Lets understand the basics. Product cost is a cost which is incurred to manufacture product. This ty...
Q: ter Corp acquired dinary shares with yment of cash of F
A: Shareholders also invest money in the company and in return they become the owners in proportion to ...
Q: Inter Company was founded in Dec 2018. Inter Company provides sports services to customers. During m...
A: The T-accounts represent the balance in specific account and further trial balance is prepared using...
Q: Based on the provided information, how is the corridor amount solved for in each of these cases? Tha...
A: This same corridor rule throughout retirement accountancy mandates the presence of any actuarial gai...
Q: Which of the following costs incurred subsequent to the acquisition of a machine would be appropriat...
A: Accumulated depreciation is the amount of depreciation which the company has been charged on the ass...
Q: Available-For-Sale Investments With Known Market Value Porter Inc. is a Canadian public company w...
A:
Q: eto ABC Con coupo bag of dog TOod it sells. return for eight coupons, customers receive a leash. The...
A: The correct calculation answer for the above question is given in the following steps for your refer...
Q: A new product introduced by Beauty Promotions carries a two-year warranty against defects. The estim...
A: The warranty liability is the expense due as per estimation but not demanded by customer yet.
Q: information, please prepare income statements using both traditional and contribution formats Items ...
A: INCOME statement is prepare to know the profit position of a company . it can be done by preparing ...
Q: For each of the following separate situations, determine the amount of expense each company should r...
A: The adjusted journal entries are passed for the month ended, quarter ended or year ended. According ...
Q: Toys Co. started a new promotional program. For every 10 box tops returned, customers receive a bask...
A: The correct answer calculation is given in the following steps for your reference.
Q: Which of the following statements is the most reasonable conclusion from the given information below...
A: Quick ratio is a popular liquidity ratio. This ratio is also known as acid test ratio. This along wi...
Q: Problem 5 (Determination of Profitability) Toyota Auto Shop had sales of P700,000 in 20X5 and cost o...
A: Ans. a Earning After Tax = P 75,600 Toyoto Auto Shop SL Particulars Amount 1 Sales P...
Q: Choi Suganaki sold the following assets at a garage sale in the current year: • Used clothing (a for...
A: 1) Used clothes Sale proceeds. $750 less: purchases price. ($1200) ...
Q: What should businesses consider when it comes to the expense side of the BPM equation?
A: Businesses should see that the expense side is minimized or at least the benefit of BPM( (BUSINESS P...
Q: Jones Company had net income of $10,000 for the Beginning total assets were $150,000 and ending asse...
A: ROA is a financial ratio that indicates the percentage of return an entity has generated from it's a...
Q: Lovely Corp 's current liabilities at Dec. 31, 2019 totaled P 1,500,000 before any necessary year-en...
A: Current Liability: Current liabilities are financial commitments owed by a corporation that are due ...
Q: 22. It uses the physical inventory system of accounting for your examination, you discovered that th...
A: Understatement of ending inventory results in higher cost of goods sold The net effect of the overst...
Lease Accounting
At the beginning of the year 1 January 2017, PMA, Inc., a rail company leased out diesel generators to GP, Ltd. to provide backup to the transportation system during power outages. The lease has 5-year term in which PMA has to make $500,000 payment to GP at the beginning of each year. Fair value of the equipment is $2,000,000 and has estimated life of 5 years.
Journalize the inception of the lease and the first payment made by PMA in the books of GP (Lessee) if rate of interest in the lease is 8%.
Please write the steps so I can understand it
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2016. Annual lease payments of $1,510, based on an interest rate of 8%, are to be made every December 31, beginning with December 31, 2016. Required Assume that the lease is treated as an operating lease. Will the value of the forklift appear on Koffmans balance sheet? What account will indicate that lease payments have been made? Assume that the lease is treated as a capital lease. Prepare any journal entries needed when the lease is signed. Explain why the value of the leased asset is not recorded at $6,040 (1,5104). Prepare the journal entry to record the first lease payment on December 31, 2016. Calculate the amount of depreciation expense for the year 2016. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2016?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.)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.
- 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.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 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.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 and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are nude at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Required: 1. Record the lease (including the initial receipt of 2,000) and the receipt of the second and third installments of 2,000 in Ansons accounts. Carry computations to the nearest dollar. 2. Record the lease (including the initial payment of 2,000), the payment of the second and third installments of 2,000, and monthly depreciation in Bullards accounts. The lessee records the lease obligation at net present value. Carry computations to the nearest dollar.
- 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.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 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 method