Oriole Corporation is a lessee with a finance lease. The asset is recorded at $720000 and has an economic life of 8 years. The lease term is 5 years. The asset is expected to have a fair value of $210000 at the end of 5 years, and a fair value of $55000 at the end of 8 years. The lease agreement provides for the transfer of title of the asset to the lessee at the end of the lease term. What amount of amortization expense would the lessee record for the first year of the lease? $133000 $144000 $102000 $83125
Q: hort-term notes payable: O Can replace an account payable O Can be issued in return for money borrow...
A: Short term notes payable is a current liability. It is an obligation to pay a specified sum plus int...
Q: How much is the income tax due assuming the use of the 8% optional tax?
A: Optional tax rate is the optional which the tax payer can choose to be taxed on that rate when the c...
Q: Which of the following is an option for consolidating data into one table or worksheet? Use the VLOO...
A: This is a Multiple Choice Question in which we have to select the correct option.
Q: Company 1 Company 2 Selling price per deck $ 3.00 $3.00 Cost of paper deck 0.62 0.65 Printing ink pe...
A: Breakeven is the point where company's profit is equal to 0. This is the point where company earns n...
Q: A lawsuit is an example of a contingent liability for the defendant. O True O False
A: Contingent Liabilities are the liabilities the outcome of which is unknown.
Q: On August 31, 2022, Jackie agreed to purchase a parcel of land for P1,000,000 which the seller consi...
A: Capital gain refers to the income earned by selling a capital asset over and above its indexed cost ...
Q: Shamrock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment t...
A: Journal entries:
Q: Calculate cash flows with indirect method.
A: Income reported = $ 300000 Decreases in Accounts Receivable = $14500 Increase in accounts payable = ...
Q: The following information for Clark Enterprises is given below. December 31, 2021 Assets and obligat...
A:
Q: 1. What is the activity variance for the revenue? (Indicate the effect of each variance by selecting...
A: Variance analysis is one of the important technique of management accounting analysis, under which a...
Q: 15 Factory security and assembly activities at an appliance manufacturing plant would be best classi...
A: Hi student Since there are multiple questions, we will answer only first question.
Q: Anderson Enterprises uses a job costing system. Record the following transactions in Anderson Enterp...
A: Journal entries are used to record track of financial transactions. To generate a journal entry, you...
Q: The Clearinghouse Sweepstakes has just informed you that you have won $1 million. The amount is to b...
A: Formula: Present Value of winnings = Amount to be received per year X Present value of annuity of $ ...
Q: Difference between labour cost,cost of sales and selling price in informal and formal business
A: Merchandising Business- A merchandising business is one that deals with the purchase and sale of com...
Q: vironmentally- ke the product:
A: The correct option is 4.
Q: Exercise 8-50 (Algo) Job Costing and Process Costing (LO 8-7) Coastal Cycles makes three models of e...
A: A product's unit cost can be defined as the cost per unit of a single product. It is calculated by d...
Q: 1. In the _____, a balance is calculated at the end of each each, incorporating any purchases, credi...
A: Fill in the blanks in the step 2.
Q: Which of the following statements regarding equity is not true? It is defined independently of asset...
A: The accounting equation states that assets equals to sum of liabilities and shareholders equity.
Q: A credit sale of $4,000 is made on April 25, terms 2/10, n/30, on which a return of $250 is granted ...
A: Formula: Net sales = Sales - sales returns and allowances
Q: Prepare journal entries to record each of the following sales transactions of a merchandising compan...
A: The journal entries are prepared to keep the record of day to day transactions of the business. Usin...
Q: On November 1, Duane paid $12.000 in advance for a year's rent. The November 30 adjusting entry for ...
A: Formula: Monthly rent amount = Yearly rent / number of months in a year
Q: Pharoah Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to b...
A: Lease asset record by lessee: The lease debt is equal to the present value of future lease payments ...
Q: Distribution Limited projects sales next year to be $4 million and expects to earn 5% of that amount...
A: Assets is the resource that generates that generates potential benefits in the future for any entity...
Q: A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash...
A: Introduction:- Cash flows are classified into three types as follows under:- Cash flows from operati...
Q: From the follovwing information, you are requirecd to compute the basic and adjusted Earnings per sh...
A: Basic earnings per share is the earning belongs to one share. It is calculated by dividing earnings ...
Q: Scenario 5—In 2021, The U.S. government sends $100 of stimulus checks to households, which household...
A: Answer: $50. Explanation: Investment refers to the part of income which is saved for capital formati...
Q: Lakeview Manufacturing has the following factory labour costs: Factory-Gross wages $284,000 Producti...
A: Note: Sales salaries expenses are not related to the factor expenses. Sales salaries expense charged...
Q: Alpha Beta Inc. was organized on Jan. 1, 2021. It is authorized to issue 20,000 preference shares wi...
A: Balance Sheet Shareholders' Equity Common Stock (21,500 shares X P 10 per share) ...
Q: Direct materials are added at the beginning of the process and conversions costs are uniformly appli...
A: Solution: Computation of Equivalent unit of Production Particulars Physical Units Material Conv...
Q: Steven and Son Inc. sells its car wash package for $180 per unit, its total variable costs per unit ...
A: Cost volume profit analysis is the technique used by the management for decision-making. The methods...
Q: A manufacturer estimates that she can sell a maximum of 155 thousand cell phones in a city. By adver...
A: To arrive at some calculations on the whole, we firstly divide the whole data into smaller identifia...
Q: Required: 1. Record each of the transactions listed above. 2. Record adjusting entries on January ...
A: 1. Date General Journal Debit Credit 2021 $ $ Jan 1 Equipment 19,500 Cash 19,500 ...
Q: Little Lemon Co. is identifying the value of its equity using the enterprise valueapproach as they h...
A: The weighted average cost of capital (wacc) is the rate that a company is expected to pay on average...
Q: 4. What is the adjusted cash balance as of January 31, 2022? A. 2,000 B. 3,000 C. 13,500 D. None...
A: Ideally cash balance as per cashbook and bank balance as per bank statement must reconcile with each...
Q: Save-the-Earth Company reports the following income statement accounts for the year ended December 3...
A: A MULTI-STEP INCOME STATEMENT IS A FINANCIAL REPORTING DOCUMENT THAT IS USE TO DETERMINE AND SHOW NE...
Q: On August 1, 2010, a company issues bonds with a par value of $600,000. The bonds mature in 10 years...
A: Interest payable on bond is $600000 × 6% × 5/12 = $ 15000 The amortization...
Q: On May 31, 2020, Dana Company paid $ 550,000 cash and issues 15,000 shares of its stock with a marke...
A: Good will = purchase consideration - Net Asset Value Note: Net asset value under business combinati...
Q: Gensource Company provided the following information from its accounting records for 2021: Estimated...
A: The predetermined overhead rates are used to allocate the overhead. It can be calculated on the basi...
Q: Costs incurred are summarized as follows: WIP - Polishing Process A/C January 1 Bal. ...
A: Direct Materials refers to the raw materials used to manufacture a product. Normally all the direct ...
Q: *................... You have been assigned to audit the financial statements of TRUE CORPORATION, a...
A: Rental Income: It is is an income account that is earned from leasing to third parties and is pre...
Q: El1.1 (LO 1), AP C.S. Lewis Company had these transactions involving notes payable. Borrows $50,000 ...
A: journal entry for above transaction are as follows
Q: John's Tree Service depreciation for the month is $500. The adjusting journal entry is: O A. Depreci...
A: Introduction: Depreciation: Decreasing value of fixed assets over its useful life period called as d...
Q: Question 1 The following balances have been extracted from the books of Alpha Berhad as at 31 Decemb...
A: Financial Statement - Financial Statement of the company includes Profit and Loss Account, Statement...
Q: For each transaction, suggest two internal controls you would implement. Justify your response. Here...
A: Internal Control: Internal control is a method used by a company's board of directors, management, a...
Q: Infrequent Items) Presented below is a combined single-step income and retained earnings statement f...
A: Solution Retained earning are cumulative net earnings or profits of a company after accounting for ...
Q: On January 1, 2022, Lucas Company acquired 85% of outstanding shares of Luna Corp. The consideration...
A: Solution Non controlling interest is an ownership position wherein a shareholder owns less than 50% ...
Q: Ringmeup Inc. had net income of $148,800 for the year ended December 31, 2019. At the beginning of t...
A: Weighted average number of outstanding shares = 38,000×412 + 53,000×712 + 48,300×112 ...
Q: umping with joy, you were the first one which Jackie shared her good news. She was just promoted as ...
A: Fringe benefit tax is a form of tax that is levied by the employer on the non-cash benefits of the e...
Q: Accounting Equation Katherine Brewer is the stockholder and operator of Our Idol LLC, a motivational...
A: Accounting Period: An accounting period is a timeframe that covers specific bookkeeping capacities, ...
Q: Dividends Per Share Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as ...
A: Cumulative preferred stock is a kind of preferred stock that stipulated a term that if any dividend ...
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?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.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).
- 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.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.Lessee 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
- 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.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.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.
- Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.Sales-Type Lease with Guaranteed Residual Value Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2017. The lease is appropriately classified as a sales-type lease. The lease terms, provisions, and related events are as follows: The lease is noncancelable, has a term of 8 years, and has no renewal or bargain purchase option. The annual rentals are 65,000, payable at the end of each year. The interest rate implicit in the lease is 15%. Darwin agrees to pay all executory costs directly to a third party. The cost of the equipment is 280,000. The fair value of the equipment to Calder is 308,021.03. Calder incurs no material initial direct costs. Calder expects that it will be able to collect all lease payments. Calder estimates that the fair value at the end of the lease term will be 50,000 and that the economic life the equipment is 9 years. This residual value is guaranteed by Darwin. The following present value factors are relevant: PV of an ordinary annuity n = 8, i = 15% = 4.487322 PV n = 8, i = 15% = 0.326902 PV n = 1, i = 15% = 0.869565 Required: 1. Determine the proper classification of the lease. 2. Prepare a table summarizing the lease receipts and interest income earned by Calder for this lease. 3. Prepare journal entries for Calder for the years 2019, 2020, and 2021. 4. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the present value of next years payment approach to classify the lease receivable as current and noncurrent. 5. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the change in present value approach to classify the lease receivable as current and noncurrent.Sunland Corporation is a lessee with a finance lease. The asset is recorded at $1020000 and has an economic life of 8 years. The lease term is 5 years. The asset is expected to have a fair value of $360000 at the end of 5 years, and a fair value of $130000 at the end of 8 years. The lease agreement provides for the transfer of title of the asset to the lessee at the end of the lease term. What amount of amortization expense would the lessee record for the first year of the lease? $132000 $111250 $178000 $204000
