Long-term financing leases currently: Multiple Choice show up on the balance sheet. appear on the company's income statement. do not appear on any financial statements. appear in the footnotes to the annual report.
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- 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.Recording Entries for Finance Lease with Unguaranteed Residual Value—Lessee Lessor Corporation, a manufacturer of equipment, enters into a lease of specialized equipment with Lessee Corp. on January 1 of Year 1. Title to the asset remains with Lessor Corp. at the end of the lease. Lessee Corp. does not guarantee the residual value of the specialized equipment at the end of the lease term, and the lease contains no renewal or purchase options. The following information pertains to the lease. -- Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Lease term 5 years Economic life of the leased equipment 6 years Annual lease payments $1,098 Payment date (first payment due at lease commencement) Annually on Jan. 1 Fair value of the leased equipment $5,200 Lessor Corp’s carrying value of the leased equipment $4,500 Rate implicit in the lease (known by lessee) 6.02% Estimated fair value of the…TOPIC: LEASESa. Compute the Rent Expense reported in Faith Company's profit or loss for the yeaars ended December 31, 2020 and December 31, 2021, assuming that Faith elected to apply for this short-term lease the recognition and measurement exemptions under IFRS 16 Leases.b. Prepare journal entries for years 2020 and 2021 in the books of Faith Company and Love Corporation.
- Under the pre-2019 accounting standards, how are operating leases reported in the lessee's balance sheet? Select one: A. As an asset that is depreciated, similar to the company's other assets. B. As either a short-term or long-term liability, depending on the length of the lease C. At the present value of the future minimum lease payments. D. Operating leases are not disclosed in the lessee's balance sheet or annual report. E. None of the aboveABC Company leases out an equipment under direct finance lease. There is no residual value nor bargain purchase option. The entity wishes to earn 8% on a 5-year lease of equipment costing P3,234,000. First annual lease payment is payable immediately on the contract date on January 1, Year 1. How much is the interest revenue for Year 1? (use three decimal places for the PV factors) A.P198,720 B.P258,720 C.P154,620 D.noneSales-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.
- 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).Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.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.ABC Company leases out an equipment under direct finance lease. There is no residual value nor bargain purchase option. The entity wishes to earn 8% on a 5-year lease of equipment costing P3,234,000. First annual lease payment is payable immediately on the contract date on January 1, Year 1. How much is the interest revenue for Year 1? (use three decimal places for the PV factors) P198,720 P258,720 P154,620 noneWhich type of lease will not increase a company’s assets or long-term liabilities?a. A one-year operating leaseb. A finance leasec. A lease for an asset of a specialized nature with no alternative use at the end of the lease termd. A lease that transfers ownership of the asset to the lessee by the end of the lease term