Hh.15. Kendall County entered into a lease agreement to finance computer equipment used in government offices. The leasecovers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At theinception of the lease, a payment of $710,000 will be made; two additional annual lease payments of $710,000 are to bemade near the end of each year. The total amount to be paid under this lease is $2,130,000. The lease arrangementsimplied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initialpayment, is $2,068,563. Assume that the fair value of the equipment at the inception of the lease is $2,120,000.RequiredPrepare entries required to record the inception of the lease in the General Fund, the debt service fund, and thegovernmental activities journal.Prepare entries required to record the payment at the end of the first year of the lease in both the debt service fund andgovernmental activities journal.c-1. Which financial statement prepared at the end of the first year would show both the asset and the liability related tothis lease?c-2. What amount would the liability be reported at the end of the first year?

Particulars Debit Credit 1 Lease receivable $2,068,563 Lease revenue $2,068,563…

Answered: Kendall County entered into a lease…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7MC: Using the information provided, what transaction represents the best application of the present...

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Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Kendall County entered into a lease agreement to finance computer equipment used in government offices. The lease covers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At the inception of the lease, a payment of $640,000 will be made; two additional annual lease payments of $640,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,920,000. The lease arrangements implied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $1,864,620. Assume that the fair value of the equipment at the inception of the lease is $1,900,000. What amount would the liability be reported at the end of the first year
At the start of Year 1, the City Peacock leased 30 computers for use by various officials in school administration and public safety at a total cost of $90,000 per year. The first lease payment is made immediately. The contracts are for five years, the expected life of the computers. After that life period, the city will return them to the lessor. What reporting is appropriate for the city for the first year?
On January 1, Espinoza Moving and Storage leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. If Espinoza’s revenues exceed a specified amount during the lease term, Espinoza will pay an additional $4,000 lease payment at the end of the lease. Espinoza estimates a 60% probability of meeting the target revenue amount. What amount should be added to the right-of-use asset and lease liability under the contingent rent agreement?
Land City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expiration of the lease, the trucks will revert to the city. 1. Prepare appropriate journal entries in the general fund, the general fixed assets account group, and the general long-term debt account group to record the signing of the lease. 2. Prepare appropriate journal entries in the same fund and account groups to record the first payment on the lease. The city records depreciation on garbage trucks using the straight-line method.
Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%. Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc. Round amounts to the nearest…
Pharoah Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $14,110 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 5% per year.
To raise operating funds, North American Courier Corporation sold its building on January 1, 2021, to an insurance company for $508,000 and immediately leased the building back. The lease is for a 10-year period ending December 31, 2030, at which time ownership of the building will revert to North American Courier. The building has a carrying amount of $470,000 (original cost $1,140,000). The lease requires North American to make payments of $89,908 to the insurance company each December 31. The building had a total original useful life of 30 years with no residual value and is being depreciated on a straight-line basis. The lease has an implicit rate of 12%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. Prepare the appropriate entries for North American (a) on January 1, 2021, to record the transaction and (b) on December 31, 2021, to record necessary adjustments.2. Show how North American’s…
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $14,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $98,000 and were expected to have a useful life of seven years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1, and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1.Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. Journal entry worksheet Record the beginning of the lease for Nath-Langstrom Services. Record the leases payment made by Nath-Langstrom Services.…
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 6%. The contract calls for four rent payments of $14,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $98,000 and were expected to have a useful life of seven years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1, and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 2 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field). Round your intermediate calculations and final…
To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2021, for $820,000 and immediately leased the building back. The operating lease is for the final 10 years of the building’s estimated 20-year remaining useful life. The building has a fair value of $820,000 and a book value of $660,000 (its original cost was $1 million). The rental payments of $120,000 are payable to the insurance company each December 31. The lease has an implicit rate of 8%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. & 2. Prepare the appropriate entries for National Distribution Center on January 1, 2021 and December 31, 2021, to record the sale-leaseback and necessary adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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