P21.7 (LQ.3) (Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) Amirante SA manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is R$495,678, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be R$15,000. The hospital will pay rents of R$60,000 at the beginning of each year. Amirante incurred R$300,000 in manufacturing costs and R$14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%.
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P21-8. Please answer P21-8 part a,c,d, and show all workings clearly.
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- P21-15 (Please use the latest IFRS accounting standards to answer the question, and take note that lessee do recognise depreciation) Cleveland Group leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract starting January 1, 2022. Terms of the lease require payments of R$48,555 each January 1, starting January 1, 2022. The crane has an estimated life of 7 years, a fair value of R$240,000, and a cost to Cleveland of R$240,000. The estimated fair value of the crane is expected to be R$45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and the crane is not a specialized asset. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is probable. Abriendo's incremental borrowing rate is 8%, and Cleveland's implicit interest rate of 8% is known to Abriendo. Instructions a. Identify the type of lease involved and give reasons for your…On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…
- The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and Pharoah Electronics, a lessee, for a computer system. Commencement date October 1, 2020 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at October 1, 2020 $262,056 Book value of asset at October 1, 2020 $280,000 Residual value at end of lease term –0– Lessor’s implicit rate 10 % Lessee’s incremental borrowing rate 10 % Annual lease payment due at the beginning of each year, beginning with October 1, 2020 $54,700 The collectibility of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment.The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a…The following facts pertain to a non-cancelable lease agreement between Alschuler Leasing Company and McKee Electronics, a lessee, for a computer system. Commencement date October 1, 2020 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at October 1, 2020 $313,043 Book value of asset at October 1, 2020 $280,000 Residual value at end of lease term –0– Lessor's implicit rate 8% Lessee's incremental borrowing rate 8% Annual lease payment due at the beginning of each year, beginning with October 1, 2020 $62,700 The collectibility of the lease payments is probable by the lessor. The asset will revert to the lessor at the end of the lease term. The straight-line depreciation method is used for all equipment. The following amortization schedule has been prepared correctly for use by both the lessor and the lessee in accounting for this lease. The lease is to be accounted for properly as a finance lease…Eubank Company, a lessee, enters into a lease agreement on January 1, 2021, for equipment. The following data are relevant to the lease agreement: - The term of the noncancelable lease is 4 years. Payments of $978,446 are due on January 1 of each year. The first payment is January 2021. - The fair value of the equipment on January 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with nosalvage value. - Eubank uses the straight-line method of depreciation. - Eubank’s implicit rate is 8%. - This will be treated as a finance lease (Lessee Perspective). Instructions: Prepare the journal entries on Eubank’s books (lessee) that relate to the lease agreement for the following dates, you do not need to create an amortization schedule. a. January 1, 2021. b. December 31, 2021.
- Cullumber Company has a machine with a cost of $651000 which also is its fair value on the date the machine is leased to Park Company. The lease is for 6 years and the machine is estimated to have an unguaranteed residual value of $64000. If the lessor’s interest rate implicit in the lease is 12%, the 6 beginning-of-the-year lease payments would be 127,476 108,500 134,333 141,375On January 1, 2021, Pharoah, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2021 is $5600000; however, the book value to Holt is $4550000.(c) The building has an estimated economic life of 10 years, with no residual value. Pharoah depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Pharoah’s incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Pharoah, Inc.(f) The yearly rental…On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement.(a) The agreement requires equal rental payments at the beginning each year.(b) The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000.(c) The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Yancey’s incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancy (f) The yearly rental payment…
- Hi, I cannot figure out the amount of 44,564.86 of amortization expense. would you help me out? thanks E20-4 Lessee Accounting for Finance Lease LO 20.4 On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment from Stone Inc. Concord agrees to make lease payments of $47,500 per year. Additional information pertaining to the lease is as follows: The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due every January 1, beginning January 1, 2019. The fair value of the manufacturing equipment on January 1, 2019, is $150,000. The equipment has an economic life of 7 years. Concord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term. Concord considers it probable that it will have to pay $5,000 cash at the end of the lease terms to satisfy this residual value guarantee. Concord Corp. depreciates similar assets using the…Which of the following lease arrangements would most likely be accounted for as a finance lease by the lessor if it is under US GAAP instead of IFRS? a. The lease agreement runs for 15 years and the economic life of leased property is 20 years. However, the title is not transferred to the lessee at the end of the lease term. b. The present value of future payments is P73,600 when the fair value of the property is P80,000 at the end of the first lease year. c. The lessee shoulders the gain or loss from fluctuation in the fair value of the underlying asset. d. The lessee may renew the two-year lease for two additional years; originally the lease payments were P10,000 monthly. Renewed lease term calls for P11,000 monthly rental payment.Assume that on January 1, 2020, Elmer's Restaurants sells a computer system to Liquidity Finance Co. for $680,000 and immediately leases back the computer system. The relevant information is as follows. 1. The computer was carried on Elmer's books at a value of $600,000. 2. The term of the non-cancelable lease is 3 years; title will not transfer to Elmer's, and the expected residual value at the end of the lease is $450,000, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $115,970 at the beginning of each year. 4. The incremental borrowing rate for Elmer's is 8%. Elmer's is aware that Liquidity Finance set the annual rental to ensure a rate of return of 8%. 5. The computer has a fair value of $680,000 on January 1, 2020, and an estimated economic life of 10 years. Instructions Prepare the journal entries for both the lessee and the lessor for 2020 to reflect the sale and leaseback agreement.