Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,294, based on an interest rate of 8%, are to be made every December 31, beginning with December 31, 2017. PV of Annuity of $1 I am trying to find the value of assets and liabilities. I believe I am missing a step to come up with the answer.
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Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,294, based on an interest rate of 8%, are to be made every December 31, beginning with December 31, 2017.
PV of Annuity of $1
I am trying to find the value of assets and liabilities. I believe I am missing a step to come up with the answer.
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- 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. 47,910Using 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.Metlock Corporation enters into a 6-year lease of equipment on January 1, 2017, which requires 6 annual payments of $38,200 each, beginning January 1, 2017. In addition, Metlock guarantees the lessor a residual value of $18,500 at the end of the lease. However, Metlock believes it is probable that the expected residual value at the end of the lease term will be $10,900. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectability of lease payments is probable and the carrying amount of the equipment is $208,718. Prepare Lost Ark’s 2016 and 2017 journal entries, assuming the implicit rate of the lease is 10% and this is known to Metlock.
- On January 1, 2016, the Millwork Company signed a four-year non-cancelable lease of equipment from the Midford Company. The annual lease payments of $35,000 are to be paid on January 1 of each year. The first payment is due on January 1, 2016. The lease contains a bargain purchase option price of $15,000. The equipment's fair value is expected to be $30,000 on December 31, 2019. The estimated economic life of the equipment is six years, and the estimated residual value at the end of six years is $5,000. Millwork's incremental borrowing rate is 12%, and the implicit interest rate used in the lease agreement is 10%, which is known by Millwork.Present value factors for interest rates of 10% and 12% are as follows: 10% 12% Present value of $1 for n = 1 0.90909 0.89286 Present value of $1 for n = 4 0.68301 0.63552 Present value of an ordinary annuity for n = 4 3.16987 3.03735 Present value of an annuity due for n = 4 3.48685 3.40183 Millwork…On January 1, 2016, the Millwork Company signed a four-year non-cancelable lease of equipment from the Midford Company. The annual lease payments of $35,000 are to be paid on January 1 of each year. The first payment is due on January 1, 2016. The lease contains a bargain purchase option price of $15,000. The equipment's fair value is expected to be $30,000 on December 31, 2019. The estimated economic life of the equipment is six years, and the estimated residual value at the end of six years is $5,000. Millwork's incremental borrowing rate is 12%, and the implicit interest rate used in the lease agreement is 10%, which is known by Millwork.Present value factors for interest rates of 10% and 12% are as follows: 10% 12% Present value of $1 for n = 1 0.90909 0.89286 Present value of $1 for n = 4 0.68301 0.63552 Present value of an ordinary annuity for n = 4 3.16987 3.03735 Present value of an annuity due for n = 4 3.48685 3.40183 Millwork…On December 31, 2016, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2016, the inception of the lease, and at each December 31 through 2019. Branch Motors’ interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2020) the truck was expected to be worth $15,000. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line depreciation. Yard Art guaranteed a residual value of $6,000. Guarantor Assurance Corporation was engaged to guarantee a residual value of $11,000, but with a deductible equal to any amount paid by the lessee ($11,000 reduced by any amount paid by the lessee). Yard Art’s incremental borrowing rate is 9%. A $1,000 per year maintenance agreement was arranged for the truck with an outside service firm. As an expediency,…
- On January 1, 2018, ABC Company entered into a five-year nonrenewable operating lease, commencing on that date, for office space. The office space has a useful life of 50 years and the lease specifies that in the first two years, rent will be P20,000 per month but in the last three years, it will be P25,000 per month. How much is the total rent receivable at the end of2019?Indiana Jones Corporation enters into a 6-year lease of equipment on January 1, 2017, which requires 6 annual payments of $40,000 each, beginning January 1, 2017. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at lease-end. The equipment has a useful life of 6 years. Prepare Indiana Jones’ January 1, 2017, journal entries assuming an interest rate of 10%.Sheridan Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,448 at the beginning of each year. The first payment is received on January 1, 2020. Sheridan had purchased the machine during 2016 for $116,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. Compute the amount of the lease receivable.
- Pharoah Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,296 at the beginning of each year. The first payment is received on January 1, 2020. Pharoah had purchased the machine during 2016 for $116,000. Collectibility of lease payments by Pharoah is probable. Pharoah set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Pharoah at the termination of the lease. Compute the amount of the lease receivable Prepare all necessary journal entries for Pharoah for 2020. Suppose the collectibility of the lease payments was not probable for Pharoah. Prepare the necessary journal entry for the company in 2020. Suppose at the end of the lease term, Pharoah receives the asset and determines that it actually has a fair value of $1,170instead of the anticipated residual value of $0. Record the…Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,616, based on an interest rate of 6%, are to be made every December 31, beginning with December 31, 2017. PV of Annuity of $1 Required: Refer to the table above for present value factors. 1. Assume that the lease is treated as an operating lease. a. Will the value of the forklift appear on Koffman's balance sheet?No b. What account will indicate that lease payments have been made?Lease expense 2. Assume that the lease is treated as a capital lease or finance lease. a. Identify and analyze the effect when the lease is signed. Activity Investing and Financing Accounts Leased Asset Increase, Lease Obligation Increase Statement(s) Balance Sheet only How does this entry affect the accounting equation?If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is…On January 1, 2016, Renee Corp., a lessee, signed a five-year capital lease for new equipment. The lease requires annual payments of $8,000. The first payment is due on December 31, 2016. Renee guaranteed a residual value of $2,000. On December 31, 2020, Renee returned the asset to the lessor, and the asset was appraised at a value of $1,500. Renee should record which of the following on December 31, 2020?
