On January 1, 2024, Blue Co. recorded a right-of-use asset of $869,628 in a 10-year operating lease. The lease calls for ten annual payments of $120,000 at the beginning of each year. The interest rate charged by the lessor was 8%. What amount will Blue Co. record for amortization expense on December 31, 2024? O $60,030 O $64,832 O $86,963 O $59,970

On January 1, 2024, Blue Co. recorded a right-of-use asset of $869,628 in a 10-year operating lease. The lease calls for ten annual payments of $120,000 at the beginning of each year. The interest rate charged by the lessor was 8%. What amount will Blue Co. record for amortization expense on December 31, 2024? O $60,030 O $64,832 O $86,963 O $59,970

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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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.
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.
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.
On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
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).
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.
on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease acquired gee to pay 100,000 annually, beginning december 31, 2021 and continuingfor 30 years. on january 1, 2021, the present value of the lease payments is 1,125,000 at 8% interest rate implicit in the lease. initial direct costs amount to 50,000. What is the carrying value of the right of use asset on December 31, 2021? ₱ 1,135,833 ₱ 1,125,000 ₱ 1,087,500 ₱ 1,175,000
On January 1, 2021, Green Co. recorded a right-of-use asset of $270,360 in an operating lease. The lease calls for ten annual payments of $40,000 at the beginning of each year. The interest rate charged by the lessor was 10%. The balance in the right-of-use asset at December 31, 2021, will be:
On January 1, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement that qualifies as an operating lease to Waldo. The present value of the end-of-year lease payments of $166,554 discounted at 8% is $665,000. The expected economic life of the asset is seven years. The lease term is five years. What would Waldo record as amortization in 2021?
An entity acquired an asset costing P3,165,000. The asset is leased on January 1, 2019 to another entity. Five annual lease payments are due each December 31, beginning December 31, 2019. The unguaranteed residual value of the asset at the end of the lease term on December 31, 2013 is P500,000. The asset will revert to the lessor at the end of the lease term. The lessor’s implicit interest rate is 12%. The PV of 1 at 12% for 5 periods is .57 and the PV of an ordinary annuity of 1 at 12% for 5 periods is 3.60. What is the annual rental payment? 879,166 740,128 800,000 500,000
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.
on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease acquired gee to pay 100,000 annually, beginning december 31, 2021 and continuingfor 30 years. on january 1, 2021, the present value of the lease payments is 1,125,000 at 8% interest rate implicit in the lease. initial direct costs amount to 50,000. What is the carrying value of the right of use asset on December 31, 2021? a. ₱ 1,135,833 b. ₱ 1,125,000 c. ₱ 1,087,500 d. ₱ 1,175,000