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On January 1, 2023, Lavery Corp., which follows ASPE, leased equipment to Sunland Ltd., which follows IFRS. Both Lavery and Sunland have calendar year ends. The following information concerns this lease: 1. 2. 3. 4. 5. 6. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,400. Sunland depreciate all its equipment on a straight-line basis. Equal rental payments are due on January 1 of each year, beginning in 2023. The equipment's fair value on January 1, 2023, is $151,000 and its cost to Lavery is $110,000. The equipment has an economic life of seven years. Lavery set the annual rental to ensure a 8% rate of return. Sunland's incremental borrowing rate is 9% and the lessor's implicit rate is unknown to the lessee. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Show Transcribed Text Using (1) time value of money tables, (2) a financial calculator, or (3) Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Annual rental payment $ LA

On January 1, 2023, Lavery Corp., which follows ASPE, leased equipment to Sunland Ltd., which follows IFRS. Both Lavery and Sunland have calendar year ends. The following information concerns this lease: 1. 2. 3. 4. 5. 6. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,400. Sunland depreciate all its equipment on a straight-line basis. Equal rental payments are due on January 1 of each year, beginning in 2023. The equipment's fair value on January 1, 2023, is $151,000 and its cost to Lavery is $110,000. The equipment has an economic life of seven years. Lavery set the annual rental to ensure a 8% rate of return. Sunland's incremental borrowing rate is 9% and the lessor's implicit rate is unknown to the lessee. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Show Transcribed Text Using (1) time value of money tables, (2) a financial calculator, or (3) Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Annual rental payment $ LA

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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On January 1, 2023, Lavery Corp., which follows ASPE, leased equipment to Sunland Ltd., which follows IFRS. Both Lavery and Sunland have calendar year ends. The following information concerns this lease: 1. 2. 3. 4. 5. 6. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,400. Sunland depreciates all its equipment on a straight-line basis. Equal rental payments are due on January 1 of each year, beginning in 2023. The equipment's fair value on January 1, 2023, is $151,000 and its cost to Lavery is $110,000. The equipment has an economic life of seven years. Lavery set the annual rental to ensure a 8% rate of return. Sunland's incremental borrowing rate is 9% and the lessor's implicit rate is unknown to the lessee. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Show Transcribed Text D Annual rental payment $ C Using (1) time value of money tables, (2) a financial calculator, or (3) Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.)
Transcribed Image Text:On January 1, 2023, Lavery Corp., which follows ASPE, leased equipment to Sunland Ltd., which follows IFRS. Both Lavery and Sunland have calendar year ends. The following information concerns this lease: 1. 2. 3. 4. 5. 6. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,400. Sunland depreciates all its equipment on a straight-line basis. Equal rental payments are due on January 1 of each year, beginning in 2023. The equipment's fair value on January 1, 2023, is $151,000 and its cost to Lavery is $110,000. The equipment has an economic life of seven years. Lavery set the annual rental to ensure a 8% rate of return. Sunland's incremental borrowing rate is 9% and the lessor's implicit rate is unknown to the lessee. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Show Transcribed Text D Annual rental payment $ C Using (1) time value of money tables, (2) a financial calculator, or (3) Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.)
Prepare all necessary journal entries and adjusting entries for Sunland for 2023. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) Account Titles and Explanation Date (To record inception and payment of lease) (To record depreciation expense) Date (To record interest) Show Transcribed Text Prepare all necessary journal entries and adjusting entries for Lavery for 2023. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) Account Titles and Explanation (To record inception of lease and cost of goods sold) (Collection of lease payment) Debit (To record interest) Credit Debit Credit
Transcribed Image Text:Prepare all necessary journal entries and adjusting entries for Sunland for 2023. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) Account Titles and Explanation Date (To record inception and payment of lease) (To record depreciation expense) Date (To record interest) Show Transcribed Text Prepare all necessary journal entries and adjusting entries for Lavery for 2023. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) Account Titles and Explanation (To record inception of lease and cost of goods sold) (Collection of lease payment) Debit (To record interest) Credit Debit Credit
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