On January 2, 20X1, Gold Sor Lesting Company leases equipment to Brick Co. with 5 equal annual payments of $40,000, payable beginning December 31, 20X1. Brick Co. agrees to guarantee the $25,000 residual value of the asset at the end of the lease term Brick's incremental borrowing rate is 10% and Brick does not know that Gold Star's implicit interest rate is 8% Assume this is a financing type lease PV. Annuity De PV Ordinary Anity 8%, 5 periods 10%, 5periods What is the balance of the lease receivable on January 1, 20X27 431213 4.16986 3.99271 3.79079 PV Single Sum 0.68058 0.62092
Q: Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and…
A: Fixed cost is a cost which remains same in total and does not vary with production. Per unit fixed…
Q: 12/31, a bond (Trading) has an amortized cost/FV of $800,000/ $825,000. Its FV adj. account had a…
A: Unrealized gain / (loss) on investment = Fair value - Cost - Debit Balance of FV Adj. account +…
Q: Western Company manufactures remote control devices for garage doors. The following information was…
A: Accountants who want to calculate sales volume variance based solely on revenue can simply determine…
Q: James and Susan Morley recently converted a large turn-of-the-century house into a hotel and…
A: Temporary accounts The accounts from which the balances are transferred to permanent accounts are…
Q: Catena's Marketing Company has the following adjusted trial balance at the end of the current year.…
A: Stockholder's equity is the assets remaining in a business once all liabilities have been settled.
Q: 不 Becky would like to be a millionaire in 20 years. How much would she need to invest quarterly in a…
A: Time value of money :— According to this concept, value of money in present day is greater than the…
Q: Trevor Mills produces agricultural feed at its only plant. Materials are added at the beginning of…
A: FIFO Method :— Under this method, Equivalent units is the sum of equivalent units transferred out…
Q: Flora Tea Company began operations on January 1, 2022. Flora's adjusted trial balance at December…
A: A closing entry is a type of journal entry made to close the value of temporary accounts to…
Q: Misha Mashito, the owner of the MishMash Diner, has requested your assistance in determining some…
A: As per guidelines we are able to solve first three subparts only if you want to ask remaining…
Q: Find the amount due at the end of 9 months on a present value of Php24,600 at 12% discount interest.
A: Future value is the value of an asset or investment as of some future date. In other words, the…
Q: 11. LIBERTAD CO., is a VAT registered trader of construction supplies, had the following data for…
A: Value Added Tax: Value added tax is levied by the state government on the consumption of goods and…
Q: STARPLUS LIMITED: PLANNING FOR 2023 Starplus, Limited is well known for its focus on customer…
A: The statement of financial position also known as balance sheet shows the assets, liabilities and…
Q: Landscape Corp borrows $100,000 Signs a 5-month, 12% note on March 1 Record the following journal…
A: Journal entries refer to the recording of the transactions in the debit and credit format which can…
Q: A lathe machine costs ₱650,000 and the salvage value of ₱65,000 after 20 years. Find the…
A: Using declining balance method, the asset is depreciated based on its book value. The depreciation…
Q: Statement of Earnings
A: Income statement represents the net icome or net loss that is calculated by deducting the expenses…
Q: Cycle USA is in the business
A: In standard costing we calculate variances to find out deviation from budegeted…
Q: Calculate the 2022 Return on Common Stockholder's Equity ratio.
A: Retrun on stockholders' equity represents the earnings of the company that is entitled to the…
Q: The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following…
A: Predetermined Overhead Rate :— It is the rate used to allocate manufacturing overhead to cost…
Q: Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur…
A: SHEDULE OF COLLECTION FROM CUSTOMER Schedule of Collection From Sales States the amount of Cash…
Q: 1. Assume that all common stock is issued for cash. What amount of cash dividends is paid during…
A: STATEMENT OF SHAREHOLDERS EQUITY Statement of Shareholders Equity is also Known as Changes in…
Q: Selected transactions for Sheridan Corporation during September 2018, its first month in business,…
A: The accounting equation states that a company's total assets are equal to the sum of its liabilities…
Q: upervis employee of XYZ Corporation. He provided the following data for the taxable year 2022:…
A: Total EXEMPT de minimis benefits: P64,000 (rice allowance of P2,500 x 12 months + medical cash…
Q: Prepare Sunland's journal entries to record the $72,000 of actual returns on October 10, 2023.…
A: The journal entry are used in order to consider the appropriate accounts and balances as the affect…
Q: Splish Windows manufactures and sells custom storm windows for enclosed porches. Splish also…
A: INTRODUCTION: Sales revenue and revenue are phrases that are sometimes used interchangeably.…
Q: Required information [The following information applies to the questions displayed below.] Martinez…
A: FIXED COST Fixed costs are costs that Constant at any level of Activity. Fixed Cost Per Unit is…
Q: Grady is a member of a large family and received the following payments this year. For each payment,…
A: Realised income is the income which has been actually earned and received by a person it included in…
Q: atena's Marketing Company has the following adjusted trial balance at the end of the current year.…
A: A balance sheet is a type of statement that proves the establishment of the accounting equation by…
Q: Bramble Company sold its licorice division resulting in a loss of $81200. Assuming a tax rate of…
A: CAPITAL GAIN OR LOSS If there is a transfer of Capital Assets there is a Capital Gain or Capital…
Q: Revenue Cost of Sales Gross Profit Expenses Operating Profit Interest Payable Profit Before Tax Tax…
A: Gross profit margin ratio is the ratio which shows the percentage gross profit earned on the sales…
Q: Raphael and Martina are engaged and are planning to travel to Las Vegas during the 2022 Christmas…
A: Tax liability: The amount of tax, a taxpayer is liable to pay is called tax liability. It depends…
Q: ) Using a perpetual inventory system, how should a company record the sale of inventory costing $620…
A: JOURNAL ENTRIES Journal Entry is the First stage of Accounting Process. Journal Entry is the Process…
Q: 5) Use the following information to calculate the company's accounting net income for the year.…
A: The accrual concept of accounting states that the revenues earned during the year must be recognized…
Q: Question 4 of 11 Current Attempt in Progres Bramble Ltd is authorized tissue 9000 $4 concumulative…
A: Journal Entry :— It is an act of recording transaction in books of account when transaction…
Q: (Select all the answers that apply.) A. As with any analysis using ratios, you should investigate…
A: Both the current ratio and quick ratio are important measures of liquidity. Current ratio is the…
Q: 025 2. 1. Record each January transaction in the journal. Explanations are not required. Post the…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: Vinitpaul has the following information: AGI for 2022 Withholding for 2022 Total tax for 2021 Total…
A: Income tax penalty: Every taxpayer is liable to pay the payable amount of income tax on time. When…
Q: Universal Manufacturing uses a weighted-average process-costing system. All materials are introduced…
A: Equivalent units of production for conversion costs=Units completed+Ending WIP inventory×Ratio of…
Q: ) A company provides services on account. Indicate how this transaction would affect (1) assets, (2)…
A: Assets :— It is the resources owned by company as on specific date. Stockholders’ Equity :— It is…
Q: (3) Brown transfers Blackacre to XYZ Corp., a newly formed corporation, in exchange for 140 shares…
A: Tax consequences for Exchange of Shares A number of variables, such as the type of shares involved,…
Q: On February 1 of Year 1, Karlla Company received $100,000 cash from a one-year bank loan. The…
A: Adjusting journal entry: At year-end when the company finalizes its accounts then any unrecognized…
Q: The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be…
A: Income Statement :— It is one of the financial statement that shows profitability, total revenue and…
Q: Analyze and compare Hilton Hotels and Marriott International The annual reports of Hilton Worldwide…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: Walker Corp. enters into a contract with a customer to build an apartment building for $910,000. The…
A: The compensation for which an entity anticipates being entitled in exchange for transferring…
Q: The selling price of Maning-Mani Appliances Company's unit is Php10,000 each. The buyers are…
A: Warranty liability is a provision made by companies for expected expenses of warranty claims by…
Q: Problem 1 Direct Labour Variances Sky Inc. provides in-flight meals for a number of major airlines.…
A: DIRECT LABOUR COST VARIANCE Direct Labour Cost Variance is the difference between the actual direct…
Q: Hayes Company operated at normal capacity during the current year, producing 50,500 units of its…
A: Break Even Point (BEP) :— It is the point of production where total cost is equal to total revenue.…
Q: a. Estimate an asset beta for Sinaloa Appliance. Note: Round intermediate calculations and final…
A: The beta for all the five firms has been given in the question and in order to determine the asset…
Q: Part I: Answer the question as following 1. What is capital and define the capital? 2. Explain the…
A: Capital refers to financial assets or the resources used to produce goods and services. In…
Q: Cash budgets are essential to all small businesses. In this case, middletown construction company…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: Each of the four independent situations below describes a finance lease in which annual lease…
A: Table Values:- Present value factor for n = 10 and i = 12% is 0.3220 Present value of annuity due…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms: 1. Twenty-four lease rentals of 2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable. 2. The cost of the heavy equipment to Ramsey was 55,000. 3. Ramsey uses an implicit interest rate of 18% per year and will account for this lease as a sales-type lease. Required: Prepare journal entries for Ramsey (the lessor) to record the lease contract on March 1, 2019, the receipt of the first two lease rentals, and any interest income for March and April 2019. (Round your answers to the nearest dollar.)
- 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 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. 47,910Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line method
- 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. 36,000Use 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).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.
- On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.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.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.