At what amount will Cielo company present its lease liability as of December 31,2022? P 2,204,900P 1,925,390P 2,459,000P 2,690,000 On January 1,2020, Cielo Company leased an equipment from a lessor with the following pertinent information:500,0008 yearsAnnual rental payable at the end of each yearLease termUseful life of equipment10 yearsImplicit interest rate10%PV of an ordinary annuity of 1 for 8 periods at 10%5.33PV of an annuity due of 1 for 8 periods at 10%Present value of 1 for 8 periods at 10%5.870.47The entity has the option to purchase the equipment at the end of the lease term by paying P S00,000 which is significantlylower than the expected fair value of the equipment on the option exercise date. There is reasonable certainty that theentity will exercise the option.

Annual rental payable at the end of each year P5,00,000 Lease Term 8 years Implicit interest…

On January 1,2020, Cielo Company leased an equipment from a lessor with the following pertinent information: Annual rental payable at the end of each year 50,000 8 years 10 years Lease term Useful life of equipment Implicit interest rate PV of an ordinary annulity of 1 for 8 periods at 10% 10% 5.33 PV of an annuity due of 1 for 8 periods at 10% Present value of 1 for 8 periods at 10% 587 0.47 The entity has the option to purchase the equipment at the end of the lease term by paying PS00,000 which is significantly lower than the expected fair value of the equipment on the option exercise date. There is reasonable certainty that the entity will exercise the option.

On January 1,2020, Cielo Company leased an equipment from a lessor with the following pertinent information: Annual rental payable at the end of each year 50,000 8 years 10 years Lease term Useful life of equipment Implicit interest rate PV of an ordinary annulity of 1 for 8 periods at 10% 10% 5.33 PV of an annuity due of 1 for 8 periods at 10% Present value of 1 for 8 periods at 10% 587 0.47 The entity has the option to purchase the equipment at the end of the lease term by paying PS00,000 which is significantly lower than the expected fair value of the equipment on the option exercise date. There is reasonable certainty that the entity will exercise the option.

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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On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.
Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of 1 at 15% for 5 periods is 6.74. The present value of 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine? a. 12,500 b. 16,750 c. 25,000 d. 33,700
Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10% interest rate. Each annual payment is in the amount of $39,569 and payment is due each Dec. 31. What is the journal entry on Jan. 1 to record the cash received and on Dec. 31 to record the annual payment? (You will need to prepare the first row in the amortization table to determine the amounts.)
On May 1, 2019, a company purchased a new machine that it does not have to pay for until May 1, 2021. The total payment on May 1,2021, will include both principal and interest. Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied by what time value of money concept? a. future value of annuity of 1 b. future value of 1 c. present value of annuity of 1 d. present value of 1
Sharapovich Inc. borrowed $50,000 from Kerber Bank and signed a 5-year note payable stating the interest rate was 5% compounded annually. Sharapovich Inc. will make payments of $11,548.74 at the end of each year. Prepare an amortization table showing the principal and interest in each payment.
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.
On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
Lease Income and Expense Reuben Company retires a machine from active use on January 2, 2019, for the express purpose of leasing it. The machine had a carrying value of 900,000 after 12 years of use and is expected to have 10 more years of economic life. The machine is depreciated on a straight-line basis. On March 2, 2019, Reuben leases the machine to Owens Company for 180,000 a year for a 5-year period ending February 28, 2024. Under the provisions of the lease, Reuben incurs total maintenance and other related costs of 20,000 for the year ended December 31, 2019. Owens pays 180,000 to Reuben on March 2, 2019. The lease was properly classified as an operating lease. Required: 1. Compute the income before income taxes derived by Reuben from this lease for the calendar year ended December 31, 2019. 2. Compute the amount of rent expense incurred by Owens from this lease for the calendar year ended December 31, 2019.
On October 1, 2019, Ball Company issued 9% bonds dated October 1, 2019, with a face amount of 200,000. The bonds mature in 10 years. Interest is paid semiannually on March 31 and September 30. The proceeds from the bond issuance were 205,294.53 to yield 8.6%. Ball Company has a December 31 fiscal year-end and does not use reversing entries. Required: 1. Prepare journal entries to record the issuance of the bonds and the interest payments for 2019 and 2020 using the effective interest method. 2. Prepare journal entries to record the issuance of the bonds and the interest payments for 2019 and 2020 using the straight-line method.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
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.