On January 1, 2018, Claude paid the annual rental for 2018 and 2019 including the security deposit (non-refundable). In addition to annual rental and real property taxes, part of the lease was for Claude to improve the facility. The improvement was completed on January 1, 2020. Details of the improvements were as follows: Cost of leasehold improvement - 6,000,000 Estimated useful life of improvement - 15 years
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- EP#5 On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000.(c) The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Yancey’s incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc.(f) The yearly…43 IFRS 16-LEASES On July 1, 2019, the Manaow Corp., signs a 10-year non-cancelable lease agreement for a storage building owned by Del Inc. The following information pertains to the lease agreement.❖ Annual rental payment is P750,000 beginning July 1, 2019. The rental payment includes P50,000 for taxes and insurance.❖ The fair value of the building on July 1, 2019 is P4,478,000.❖ The building has an estimated economic life of 12 years. Unguaranteed residual value at the end of 10 years is P150,000.❖ Implicit rate is 12%. Under IFRS 16, how much is the impact of the lease transaction to the income statement of Manaow Corp. dated December 31, 2019? A. P495,271 B. P470,271 C. P433,357 D. P408,357Immediate Accounting ll Ch 16 2. Arnold Industries has pretax accounting income of $56 million for the year ended December 31, 2024. The tax rate is 25%. The only difference between accounting income and taxable income relates to an operating lease in which Arnold is the lessee. The inception of the lease was December 28, 2024. An $32 million advance rent payment at the inception of the lease is tax-deductible in 2024 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term. Required: Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2024. Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025. Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and…
- WITH SOLUTION/COMPUTATION 55. On January 1, 2019, Babson, Inc., leased two automobiles for executive use. The lease requires Babson to make five annual payments of P13,000 beginning January 1, 2019. At the end of the lease term, Babson guarantees the residual value of the automobiles will total P10,000. The interest rate implicit in the lease is 9%. Babson’s recorded lease liability on initial recognition isa. 48, 620 b. 44,070 ` c. 35,620 d. 31,070WITH SOLUTION/COMPUTATION 57. On January 1, 2019, Blaugh Co. signed a long-term lease for an office building, the trems of the lease required Blaugh to pay P10,000 Annually, beginning December 30, 2019, and continuing each year for 30 years. On January 1, 2019, the present value of the lease payments is P112,500 at the 8% interest rate implicit in the lease. In Blaugh’s December 31, 2019, balance sheet, the lease liability should be 102,500 111,500 112,500 290,000WITH SOLUTION/COMPUTATION 56.On January 1, 2019, Harrow Co. as lessee signed a five year non-cancellable equipment lease with annual payments of P100,000 beginning December 31, 2018. The implicit interest rate is 10%. How much is the interest expense for the year ended December 31, 2018? 37,900 27,900 24,200 0
- WITH SOLUTION/COMPUTATION. 51. On December 30, 2019, Haber Co. leased a new machine from Gregg Corp. The following data relate to the lease transaction at the inception of the lease:Lease term 10 yearsAnnual rental payable at end of each lease year P100,000Useful life of machine 12 yearsImplicit interest rate 10 %The lease has no renewal option, and the possession of the machine reverts to Gregg when the lease terminates. At the inception of the lease, Heber should record a lease liability of a. 0 b. 615,000 c. 630,000 d. 676,000Problem 2 On January 1, 20X1, ABC Co. enters into a 4 year lease of office equipment. Annual rental payable at the end of each year is P 12,000. As inducement in entering into the lease, the lessor makes the first 3 months of the lease as rent-free. ABC Co. opts to use the practical expedient allowed under PFRS 16 for leases of low value assets. Provide journal entries.PROBLEM 3C Assume that ADB Leasing Corp. and WXY Inc. sign a lease contract effective on January 1, 2019where ADB Leasing leases to WXY Inc. a bulldozer. The terms and provisions of the lease contract andother pertinent date are as follows:• The term of the lease is five years. The lease agreement is non-cancelable, requiring equal rentalpayments of P20,711.11 at the beginning of each year (annuity-due basis).• The bulldozer has a fair value at the commencement of the lease of P100,000, an estimatedeconomic life of five years, and a guaranteed residual value of P5,000. (WXY expects thatit is probable that the expected value of the residual value at the end of the lease will be greaterthan the guaranteed amount of P5,000.)• The lease contains no renewal options. The bulldozer reverts to ADB Leasing at the terminationof the lease.• WXY's incremental borrowing rate is 5 percent per year.• WXY depreciates its equipment on a straight-line basis.• ADB Leasing sets the annual rental rate to…
- Question 1: HKU Leasing agrees to lease equipment to Minion Furniture on January 1, 20X1. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 7 years. 2. The cost of the machinery is $700,000. The fair value of the asset on January 1, 20X1 is $700,000. 3. The lease contains a bargain purchase option of $60,000 exercisable at the end of lease term. At the end of the lease term, the asset reverts to the lessor and expected residual value is zero. Minion uses straight-line depreciation for all long-term assets. 4. HKU’s implicit rate is 6%, and Minion’s incremental borrowing rate is 6% 5. The lease is a non-cancellable lease. First payment is made in advance and the remaining payment are made on Dec 31 each year. Required: 1. Calculate the amount of the annual rental payment required. 2. Prepare journal entries to record the lease for HKU (lessor) for the year 20X1. 3.…35 part c The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pina Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term, guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. (c) Suppose Pina received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset…4... continues Sunland Leasing Company agrees to lease equipment to Coronado Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $489,000, and the fair value of the asset on January 1, 2020, is $699,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Coronado estimates that the expected residual value at the end of the lease term will be 60,000. Coronado amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Sunland desires a 9% rate of return on its investments. Coronado’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown.…