lessor signs a lease agreement with a lessee. The lease term is only 50% of the economic life of the asset, there is no bargain purchase, ownership does not transfer, and the asset is not specialized. The present value of lease payments is 92% of the asset’s fair value. This is a(an) _________ lease to the lessee
Q: Cullumber Company leases a building to Marin, Inc. on January 1, 2020. The following facts pertain…
A: If you meet any criteria of below, then considered as a finance lease, otherwise considered as an…
Q: Oriole Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to…
A: A journal entry is used to record day-to-day transactions of the business by debiting and crediting…
Q: On January 1, 2021, Sheridan, Inc. signs a 10-year noncancelable lease agreement to lease a storage…
A: A lease payment is the monthly equivalent of rent that is specifically defined in a contract between…
Q: mpany, a lessor, actually sold a machinery that it had been leasing under a sale type lease. On…
A: This is an operating Lease as the operating lease is a lease wherein the ownership is not…
Q: Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The…
A: Amortization: An amortization is the taking care of a sum owed after some time by making regular,…
Q: Assume that IBM leased equipment that was carried at a cost of $113,000 to Oriole Company. The term…
A: Lease: It is an agreement under which the owner of the asset (Lessor) grants right to another person…
Q: Flounder Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement…
A: A lease refers to a contract that allows the lessee to pay a certain amount of money to the lessor…
Q: Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual…
A: As per US GAAP, the implicit rate is known by the lessee [Pisa, Inc.]. Then implicit rate of 8% is…
Q: Assume that IBM leased equipment that was carried at a cost of $92,000 to Carla Vista Company. The…
A: Calculate the Present Value of Lease Payment Received as follows : The result of the above table…
Q: Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Whispering…
A: Calculate present value (PV) of minimum lease payments: Note: PV of annuity due at implicit rate of…
Q: Assume that IBM leased equipment that was carried at a cost of $62,000 to Carla Vista Company. The…
A: Answer - Lease Liability Recording - In recording lease Liability, the amount of lease Liability…
Q: Assume that IBM leased equipment that was carried at a cost of $120,000 to Swander Company. The term…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Dr. Alice Foyle (lessee) has a non-cancelable, 20-year lease with Brownback Realty Inc. (lessor) for…
A: Lease agreement refers to an agreement in which a contract is made to get the asset on lease. The…
Q: Phelps Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to…
A: A lease can be defined as an agreement under which one party to the agreement agrees to rent a…
Q: Prepare Packers’ 2020 journal entries, assuming the company uses straight-line depreciation and no…
A:
Q: Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual…
A: working note: 1. first, we would consider PV ANNUITY DUE i.e., 3.57710 $344,152*3.57710…
Q: Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Blossom Company.…
A: Required journal entries are shown below:
Q: Giannis Corporation leases a building to Jabari, Inc. on January 1, 2020. The following facts…
A: Required conditions need to satisfy for a Capital/ Finance lease: Any three of the below four…
Q: Assume that IBM leased equipment that was carried at a cost of $95,000 to Crane Company. The term of…
A: Required journal entries are given below:
Q: Phelps Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The…
A: Lease is the contract between lessor and the lessee for use of assets which consists the conditions…
Q: a Leasing Company signs an agreement on January 1, 2020, to lease equipment to Shamrock Company. The…
A: Journal entries are those where the transactions into the books of company and it is the very…
Q: Assume that IBM leased equipment that was carried at a cost of $97,000 to Crane Company. The term of…
A: 1. lease will be recorded at cost by IBM 2. Lease amount will be received by IBM is 30,044
Q: On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage…
A: The question is related to Accounting for lease. In a lease arrangement, the lessor determines the…
Q: 000, and the fair value of the asset on January 1, 2020, is $737,000. 3. At the end of the lease…
A: The given lease is a finance lease because the equipment lease for most of its economic useful…
Q: An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January…
A: Sales revenue recognized by the entity = annual rental x present value factors of annuity due 8% for…
Q: An entity is a manufacturer of machinery. It uses lease agreements to sell its product, On January…
A: Solution: Amount of sales revenue should be recognized by entity = Present value lease payments +…
Q: Assume that the lease contract involved an identified leased equipment at a cost of $120,000 by the…
A: Naming Convention is not available, can be slightly different :
Q: Assume that IBM leased equipment that was carried at a cost of $67,000 to Crane Company. The term of…
A: Interest revenue =( Present value of lease - rental payments)×9%
Q: Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Nash Company. The…
A: There are 2 types of leases covered under lease accounting:-Operating leaseFinance lease
Q: On January 1, 2021, Pharoah, Inc. signs a 10-year noncancelable lease agreement to lease a storage…
A: The following computations are done for Pharoah, Inc.
Q: Assume that IBM leased equipment that was carried at a cost of $173,000 to Oriole Company. The term…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Jensen Corporation leased industrial equipment to Francis Manufacturing on January 1, 2019. The…
A: Journal Entries- Journal entries refer to the certified book of a company which is used to record…
Q: Assume that IBM leased equipment that was carried at a cost of $182,000 to Sunland Company. The term…
A: Solution: As lease period is 6 years and equipment useful life is also 6 years, therefore lease…
Q: On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage…
A: Here discuss about the details of type of lease which are incurred in perspective of lessor and…
Q: Marin Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The…
A: Upon Initial recognition, the lessee shall measure lease liability at lower of Fair Value of Asset…
Q: The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and…
A:
Q: Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The…
A: Lease liability under a lease contract is the sum of the discounted values all the lease rentals…
Q: Now suppose that, at the end of the lease term, Kimberly-Clark took good care of the asset and…
A: Journal entries A journal is the company's official book in which all transactions are recorded in…
Q: Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2020. The…
A: Since we are entitled to answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
Q: Pina Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does…
A: Solution - journal entries…
Q: Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Nash Company. The…
A: Amortization schedule: This schedule shows the lease outstanding, payments and interest expense for…
Q: Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual…
A: Financial lease is that lease where lessor has given right to use the assets to lessee which cover…
Q: Glade Co. leases computer equipment to customers under direct-financing leases. The equipment has no…
A: Solution: Lease receivables should be recognized initially = Fair value of lease equipment
Q: Oriole Company leases a building to Walsh, Inc. on January 1, 2020. The following facts pertain to…
A: Annual Rent payments 3,937 PVAF (5 periods, 7%) 4.10019 Present value of Rental Payments 16,142…
Q: Terms of a lease agreement and related facts were: a. Costs of negotiating and consummating the…
A:
Q: lease term is 6 years, with equal annual rental payments of $3,933 at the beginning of each year.…
A: Lease Accounting
Q: Assume that on January 1, 2021, Fredder Corporation sells equipment to Finance Co. for $1,700,000…
A: ANSWER Assume that on January 1, 2021, Fredder Corporation sells equipment to Finance Co. for…
Q: Sheridan Company leases a building to Skysong, Inc. on January 1, 2020. The following facts pertain…
A: Sheridan would classify the lease as a Sale Type lease. Since Asset is not transferred at the end of…
Q: Suppose Blue expects the residual value at the end of the lease term to be $50,000 but still…
A: Lease refers to a contract between two parties under which one party who is the real owner of an…
A lessor signs a lease agreement with a lessee. The lease term is only 50% of the economic life of the asset, there is no bargain purchase, ownership does not transfer, and the asset is not specialized. The present value of lease payments is 92% of the asset’s fair value. This is a(an) _________ lease to the lessee and lessor, respectively (enter the number that represents the correct answer).
To the lessee To the lessor
- operating lease operating lease
- operating lease sales-type lease
- finance lease operating lease
- finance lease sales-type lease
Step by step
Solved in 3 steps
- 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.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?At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a purchase option that is reasonably expected to be exercised. The lessee should record Lease G as: a. neither an asset nor a liability b. an asset but not a liability c. an expense d. an asset and a liability
- 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.Grygiel Company leases a nonspecialized machine with a fair value of $50,000 to Baker Company. The lease has a life of 6 years and requires a $10,000 payment at the end of each year. The lease does not include a transfer of ownership nor a bargain purchase option, and the life of the lease is less than a major part of the expected economic life of the machine. It is probable that Grygiel will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Round your answers to the nearest dollar. (Click here to access the PV and FV tables to use with this problem.) Required: 1. If the interest rate implicit in the lease is 10%, compute the machine’s expected residual value.Grygiel Company leases a nonspecialized machine with a fair value of $40,000 to Baker Company. The lease has a life of 6 years and requires a $6,000 payment at the end of each year. The lease does not include a transfer of ownership nor a bargain purchase option, and the life of the lease is less than a major part of the expected economic life of the machine. It is probable that Grygiel will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Round intermediate and final answers to the nearest dollar. (Click here to access the PV and FV tables to use with this problem.) Required: 1. If the interest rate implicit in the lease is 10%, compute the machine’s expected residual value.$fill in the blank 1
- Grygiel Company leases a nonspecialized machine with a fair 20 value of $50,000 to Baker Company. The lease has a life of 6 years and requires a $10,000 payment at the end of each year. The lease does not include a transfer of ownership nor a bargain purchase option, and life of the lease is less than a major part of the expected economic life of the machine. It is probable at Grygiel will collect lease payments plus any amount necessary to satisfy a residual value guarantee. Round your answers to the nearest dollar. 1. Next Level If the interest rate implicit lease is 10%, compute the machine's expected residual value. 2. Next Level If the residual alue is guaranteed by Baker, how would each company classify the lease? 3. Next Level If the residual value is not guaranteed by Baker but is instead guaranteed by a third party,how would each company classify the lease?Assume that IBM leased equipment that was carried at a cost of $173,000 to Oriole Company. The term of the lease is 7 years December 31, 2019, with equal rental payments of $30,767 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $172,999. The equipment has a useful life of 7 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $172,999. Prepare IBM’s December 31, 2020, entry to record the lease transaction with Oriole Company.Assume that IBM leased equipment that was carried at a cost of $92,000 to Carla Vista Company. The term of the lease is 6 years December 31, 2019, with equal rental payments of $18,427 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $92,001. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $92,001.Prepare IBM’s December 31, 2020, entry to record the lease transaction with Carla Vista Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount…
- Pisa, Inc. leased equipment from Tower Company under a four-year lease requiring equal annual payments of $344,152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life with $10,000 guaranteed residual value. The rate implicit in the lease (which is known by Pisa, Inc.) is 8%. A. Is it a financing lease or operating lease? Explain why. (You do not need to discuss all five tests). B. What are the main differences between a finance lease and operating lease? C. How much would Tower Company, the lessor, record as an initial receivable? (Hint: think PV testing amount)Dr. Alice Foyle (lessee) has a non-cancelable, 20-year lease with Brownback Realty Inc. (lessor) for the use of a medical building. Taxes, insurance, and maintenance are paid by the lessee in addition to the fixed annual payments, of which the present value is equal to the fair value of the leased property. At the end of the lease period, title becomes the lessee's at a nominal price. Considering the terms of this lease, comment on the nature of the lease transaction and the accounting treatment that should be accorded it by the lessee.Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases under U.S. GAAP? Lease A Lease B A.) Operating lease Capital lease B.) Operating lease Operating lease C.) Capital lease Capital lease D.) Capital lease Operating lease