Li Zi Company entered into a lease of building on January 1, 2020. The lease contract provided the following information: Lease term 10 years Estimated useful life of leased asset 12 years Annual rental payable at end of each year for the first 5 years 400,000 Annual rental payable at end of each year for the next first 5 years 550,000 Interest rate implicit in the lease 10% No purchase option nor transfer of title REQUIRED: Prepare table of amortization and journal entries for the entire lease term.
Q: The following items are related to the lease transaction between Tessie Company and Tessor Company:…
A: As per IFRS 16, Leases, the right of use asset in the books of the lessee is recognized as the sum…
Q: Required: Determine the present value of minimum lease rental payment. Prepare the journal…
A:
Q: The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and…
A: Amortization is the method of repaying a loan over time with monthly instalments. The straight-line…
Q: On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the…
A: Disclaimer: “Since you have posted a question with multiple sub-parts, we will solve first three…
Q: On January 1, 2019, AA Company leased a plastic molding machine from BB Company. Additional…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
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: On 1 July 2020, Andrew Ltd enters into a 5-year agreement to lease an item of machinery from Josh…
A: What is meant by Lease? It is an agreement between two parties in which one party agrees to…
Q: n January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the…
A: 1) Computation of Lease liability, January 1, 2020 S.No. Particulars Amount ($) P V Factor @ 8%…
Q: On January 1, 2020 Pico Company entered into a direct financing lease. A third party guaranteed the…
A: Below is the amortization schedule for lease liability which is prepared:
Q: What is the net lease receivable of the lessor at the commencement of the lease? What is the gross…
A: Financial Lease is a form of letting out an asset in such a manner that the lessee (tenant) acquires…
Q: The following items are related to the lease transaction between Tessie Company and Tessor Company:…
A: As per IFRS 16, Leases, the right of use asset in the books of the lessee is recognized as the sum…
Q: On January 1, 2020 an entity entered into a lease for commercial space with the following…
A:
Q: obie Company leased an equipment to a lessee on January 2, 2020 under a direct financing lease with…
A: A lease is a contractual arrangement where the lessee pays for the use of an asset to the lessor.
Q: Leech Company entered into a lease agreement with Lessor Company with the following terms on January…
A: Year Date Implicit Interest Rate PV Of Rate Annual rent Payable PV of the annual rent payable 1…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Carrying value of the right of use asset on Jan 1, 2021 = Present value of lease payment on Jan 1,…
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, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000…
A: The lease is a type of financing in which the owner of the asset provides the right to use the asset…
Q: Crane Company leased machinery to Stine Company on July 1, 2021, for a 10-year period expiring June…
A: Lease accounting: Lease accounting is an accounting system used to record the financial impact due…
Q: Lazy Company leased an equipment with useful life of 6 years on January 1, 2020 for period of 5…
A: Given, Lazy company leased an equipment Useful life of equipment = 6 years On January 1, 2020 Lease…
Q: On January 1, 2020, ABC Company enters into a 4-year lease of office equipment. The rent in 2020 is…
A: As per IFRS 16, practical expedient is used when the measurement of Right of use of the asset on…
Q: Using the information of Pico Company, what is the gross investment in the lease?
A: Hi student Since there are multiple questions, we will answer only first question.
Q: On January 1, 2021, the lessee company signed an operating lease to lease a building from the…
A: Lease:- Lease is an arrangement by which lessor gives the right to use an asset for given period of…
Q: On January 1, 2020, Horatio Inc. leased a tractor trailer from Hamlet Ltd. Under the terms of the…
A: Annual lease payment=$31805 Amount of residual value= $10289 Implicit interest rate= 6% lease term=…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company…
A: Lease is a contractual arrangement between two or more parties in exchange of property and money for…
Q: On December 31, 2019, an entity leased two automobiles for executive use. The lease required the…
A: Lease Liability: Lease liability is defined as a compulsion to pat leasing fees to the person who is…
Q: On January 1, 2020 an entity entered into a lease for commercial space with the following…
A: Operating Lease is a type of lease in which asset is lent of in form of rent. Which means that…
Q: Leeche Company entered into a lease agreement with Lessor Company with the following terms on…
A: Lease: It is a formal agreement between two parties where in one party lends to another, property or…
Q: On January 1, 2020 Pico Company entered into a direct financing lease. A third party guaranteed the…
A: Financial Lease is a form of letting out an asset in such a manner that the lessee (tenant) acquires…
Q: Lee Company entered into a lease of warehouse on January 1, 2020. The lease contract provided the…
A: Year Date Interest Rate PV of Interest Rate Annual rental payment PV of Annual rental payment 1…
Q: Hughey Co. as lessee records a capital lease of machinery on January 1, 2020. The seven annual lease…
A: Lease is an arrangement between two parties in which one party Lessor provides its asset to Lessee…
Q: On January 1, 2020, Naruto Company leased a new machine from Sasuke Company. The following data…
A: At the inception of the lease, in the books of lessee, lease liability is recorded at present value…
Q: On January 1, 2019, ABC Company leased an office building with the following terms: Annual rental at…
A: Lease: A lease is an agreement between a property owner and other party party who wants to utilize…
Q: The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and…
A:
Q: On January 1, 2021, the lessee company signed an operating lease to lease a building from the…
A: It is an agreement whereby the Lessee secures the right to use the asset but not its ownership.
Q: On January 1, 2019, Shak, Inc. signed a noncancelable lease for a sneaker shining machine. The…
A: Introduction: A noncancelable lease for a shoe polishing machine was signed by Shak, Inc. The…
Q: On January 1, 2021, Variety Company entered into an 8-year lease of a floor of a buildin with useful…
A: The liability of lease states the liability to make the payments of the lease as well as it is…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Right of use asset as on January 1,2021 = present value of lease payments + initial direct cost =…
Q: Autocar Company leased a machine to a lessee on January 2, 2020 under a direct financing lease with…
A: Definition: A lease is a contractual arrangement where the lessee pays for the use of an asset to…
Q: On December 31, 2020, Kid Company leased equipment from another entity. Pertinent lease transaction…
A: Leased Assets:- It means it's an agreement where one party lets out his or her assets to another…
Q: On January 1, 2020 Pico Company entered into a direct financing lease. A third party guaranteed the…
A:
Q: On January 1, 2020, Dulcinea Company enters into a ten-year noncancelable lease for equipment having…
A: Finance lease refers to an agreement where a person transfer the right to use an asset to another…
Q: On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: On January 1, 2020, the Lessee Company enters into a 3-year lease of office equipment. The annual…
A: PROBLEM 1 : On 01.01.2020, Lessee company enters into 3 year lease of office equipment. Annual lease…
Q: An entity leased a machinery with useful life of 4 years on January 1, 2020 for period of 5 years…
A: The lease contract in which only the asset is transferred and not the ownership is treated as…
Q: On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the…
A: Explanation:
Q: On January 1, 2019, ABC Company leased an office building with the following terms: Annual rental at…
A:
Q: Prepare table of amortization and journal entries for the entire lease term.
A:
Li Zi Company entered into a lease of building on January 1, 2020. The lease contract provided the following information:
Lease term 10 years
Estimated useful life of leased asset 12 years
Annual rental payable at end of each year for the first 5 years 400,000
Annual rental payable at end of each year for the next first 5 years 550,000
Interest rate implicit in the lease 10%
No purchase option nor transfer of title
REQUIRED: Prepare table of amortization and
Step by step
Solved in 2 steps with 3 images
- 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.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.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.
- 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.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.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.)
- 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.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).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.
- 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?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.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.
