Plessings Company leased a piece of machinery to Banana, Inc. on January 1, 2023. The lease is correctly classified as a sales-type lease. Plessings will receive three annual lease payments of $20,900, with the first one received on January 1, 2023. There is no guaranteed or unguaranteed residual value. The fair value of the machine is $50,000 and Plessings incurs initial direct costs of $5,000. What is the implicit rate assuming the initial direct costs are expensed?
Q: Please do not give solution in image format thanku
A: The data provided contains information for both Rainier Company and Yakima Company, but there are…
Q: Revenue for a direct financing lease is calculated as ________. Group of answer choices None of the…
A: In a direct financing lease, the lessor provides financing to the lessee for the acquisition of an…
Q: Give Answer please @@@
A: Step 1 : Introduce profit marginProfit margin is the ratio between net income and net sales revenue.…
Q: A mass of 5 kg is attached to a spring with spring constant 25N/m. The mass is acted on by an…
A: To formulate the initial value problem (IVP) describing the motion of the mass, we'll start with…
Q: Differential Analysis for a Discontinued Product A condensed income statement by product line for…
A: Variable COGS: 10,000,000 x 75% = 7,500,00Variable Operating Expenses: 3,500,000 x 90% =…
Q: ! Required Information Saved [The following information applies to the questions displayed below.]…
A: Detailed explanation:When making journal/adjusting entries analyze what accounts are affected and…
Q: Puget Sound Divers is a company that provides diving services such as underwater ship repairs to…
A: Step 1: Show formula version of the solution sheet for a better understanding of the calculations:…
Q: A) By behavior B) By function C) By traceability D) By durability 12. Job costing is most likely to…
A: The objective of these questions is to test the understanding of various concepts in cost…
Q: ! Required information [The following information applies to the questions displayed below.] Badger…
A: Step 1:b) In a non-taxable stock distribution, the shareholder's tax basis is reallocated between…
Q: Suppose all incoming freshmen at a private college must take an entrance exam. Suppose the scores…
A: let X be the number of incoming freshmen at a private college X follows the normal distribution with…
Q: Dineshbhai
A: Let's examine each entry on the consolidation spreadsheet in greater detail: 1. To convert parent's…
Q: The accounting records of Wildhorse Ag. Implements shows the following data. Beginning inventory…
A: Cost of Goods Sold under Periodic System with Average CostStep 1: Calculate Weighted Average Unit…
Q: On January 1, 2024, Dolar Incorporated had the following account balances in its shareholders'…
A: Let's break down the preparation of Dolar Incorporated's shareholders' equity section of the balance…
Q: The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a…
A: The Regal Cycle Company faces a critical decision regarding the future of its Racing Bikes product…
Q: Need answer step by step I need answer expert solutions
A: The objective of the question is to create a journal entry for the Cost of Goods Sold (COGS) based…
Q: Which of the following statements is true? Group of answer choices The right-of-use asset is…
A: The objective of the question is to identify the correct statement about the calculation of the…
Q: Ashvin
A: To determine the price Micah should charge for her meals with a 45% markup, we can follow a…
Q: Required information [The following information applies to the questions displayed below.] Lone Star…
A: To calculate the dividend income recognized by Matt, we need to determine the portion of the total…
Q: Hardev
A: 2). Preparation of journal entries for Troy Wholesalers (Seller).DateGeneral JournalDebitCreditMay…
Q: Give Correct answer please
A: Book value of old machine at the time of replacement = Price of old machine - Accumulated…
Q: Project L requires an initial outlay at t=0 of $85,067, Its expected cash inflows are $14,000 per…
A: Step 1: Step 2: Step 3: Step 4:
Q: Variable and Absorption Costing-Three Products Fleet-of-Foot Inc. manufactures and sells three types…
A: 1. **Operating Income before elimination**: - The operating income is the profit generated from…
Q: Required: If the December 1 balance in the Direct Materials Inventory account was $20,000, the…
A: Hello student! Direct Materials are raw materials used in production and are considered assets. The…
Q: HELP ASAP
A: Requirement AStart by computing the overhead rate based on direct labor hours. Divide the total…
Q: An analyst with a mutual fund is considering buying an FCS Inc corporate bond. She has collected the…
A: a) Now let's determine the ratios: Operating income before depreciation and amortization (EBITDA) is…
Q: The following actual and standard cost data for direct material and direct labor relate to the…
A: Materials price variance is the difference between the actual price and standard price of the actual…
Q: Requirements a. Prepare the journal entry required to record the impairment loss. b. Assuming that…
A: Solutions for Lewad's Domino Impairment Lossa. Impairment Loss Journal Entry:Date of Impairment |…
Q: Cullumber paid $48,000 to replace part of the factory floor. The floor had been capitalized as part…
A: To prepare the journal entries for Cullumber under IFRS for the replacement of part of the factory…
Q: Solutions for Step by step
A: Step 1: Computation of Hours Nursing hours = 500 * 30 minutes / 60 minutes = 250 hours Physician…
Q: On March 15, 2022, Helen purchased and placed in service a new Escalade. The purchase price of the…
A: The objective of the question is to calculate the total depreciation deduction that Helen can take…
Q: Answer with working+Formula
A: Step 1We can compute the direct material price and quantity variances: Formula: Direct material…
Q: Data below relate to the Tori Company for May and August of the current year: May 35,000 Maintenance…
A: True statementThe variable maintenance cost is $18 per hour. Show formula version of the detailed…
Q: Urmilaben
A: Step 1: The Meaning of Assets.Assets are something owned by the company. Assets include current…
Q: Please do not give solution in image format thanku
A: StepsStep 1:The Project Y's accounting rate of return is calculated as follows:- Accounting Rate of…
Q: HELP ASAP ###
A: Revenue, Labor, Overhead, and Margin for Each ClientSelden Contracting:Hours: 270Moenhart…
Q: @@@@@Please Provide Correct answer.. otherwise i give negative vote...
A: Step 1 : Determining the Beginning Balance of SuppliesTo determine the beginning balance (January 1)…
Q: What is the p-value and do we reject or do we not reject?
A: The objective of the question is to determine whether there is a significant linear relationship…
Q: Selected financial data for Woody Company's Furniture Division is as follows: Sales Operating income…
A: Here's the calculation:Sales: $2,100,000Operating Income: $420,000Total Assets: $1,050,000ROI =…
Q: am.303.
A: The objective of the question is to calculate the estimated cost of goods sold (COGS) using the…
Q: Vikrambhai
A: To consolidate Sledge and Percy as of December 31, 2024, and compute the net income attributable to…
Q: How do they get the gain on sale of ppe 80000 and lease receivable 120473 in the journal entires?
A: The provided information demonstrates a good understanding of HKFRS 16 lessor accounting for a…
Q: An electric utility is considering a new power plant in northern Arizona. Power from the plant would…
A: Part 2: Explanation:1. NPV and IRR calculations involve estimating the present value of cash flows…
Q: corporation has the following account balances on September 30, 2015: Accounts Payable 2,500…
A: Income summary account is used in closing revenue and expense accounts. After these accounts were…
Q: 2. A budget airline is considering buying one more aircraft for domestic flights and wishes to…
A: Explanation -
Q: Use the transaction information provided for Mike's Motors (the previous question) to create a…
A: Mike's Motors CompanyBalance SheetAt December 31st, Year 1Assets AmountCurrent AssetsCash |…
Q: Product Tango is produced for $3.30 per gallon. Product Tango can be sold without additional…
A: The objective of this question is to perform a differential analysis to determine whether it is more…
Q: answer in proper format or skip answer with explanation , computation , narrations for each entry…
A: General Format for Entries:Each entry will follow this format:Date | Account Title | Debit | Credit…
Q: The European Recovery Program or Marshall Plan proposed a the infusion of massive amounts of…
A: The Marshall Plan, suggested by U.S. Secretary of State George Marshall in 1947, was like a lifeline…
Q: Present value index Tasty Doughnuts has computed the net present value for capital expenditure at…
A: Determine the answers for parts (a) and (b) using Excel as follows:Formula sheet:Note:To understand…
Q: please answer in text form and in proper format answer with must explanation , calculation for each…
A: Step 1: The data of property, plant and equipment - the tangible assets including value of…
Plessings Company leased a piece of machinery to Banana, Inc. on January 1, 2023. The lease is correctly classified as a sales-type lease. Plessings will receive three annual lease payments of $20,900, with the first one received on January 1, 2023. There is no guaranteed or unguaranteed residual value. The fair value of the machine is $50,000 and Plessings incurs initial direct costs of $5,000. What is the implicit rate assuming the initial direct costs are expensed?
Step by step
Solved in 2 steps
- 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 methodDetermining 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.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.
- 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.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?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.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.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
- 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.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).On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
