Present Value CalculationAmortization ScheduleJournal entriesPlease include all steps of calcualtions for my reference. Thanks! Leased AssetOn January 1, 2020, Aylmer decided to lease a machine. The accountant at the time did notrecord this asset NO TRANSACTIONS relating to leases were recorded. The followinginformation pertains to the leased machine:• The lease term is 6 years and the economic life of the asset is 7 years.• The annual lease payment is $25,600. In addition to the lease payment, annual executorycosts (insurance) of $890 must be made.• Interest rate associated with this lease is 4%.Make the appropriate calculations and requirements for reconciling the lease information. Thenprepare all the appropriate entries (including setup up the asset, the liability and any paymentsand interest).

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Accounting

Present

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 15E: Lease Income and Expense Reuben Company retires a machine from active use on January 2, 2019, for...

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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.
Blanket Co. purchased an equipment on January 1, 2020 for $500,000 for lease purposes. It has an estimated useful life of 10 years without salvage value. The company leased the machine on March 31, 2020 at $8,000 monthly for four years. Blanket Co. required security deposit of $100,000 on March 31, 2020 which shall be returned to the lessee upon lease expiration. What amount should be credited to rent income upon receipt of the $100,000 security deposit?
(Computation of Rental; Journal Entries for Lessor) Morgan Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement.1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2017, is $245,000.3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $43,622, none of which is guaranteed.4. Cole Company assumes direct responsibility for all executory costs.5. The agreement requires equal annual rental payments, beginning on January 1, 2017.6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.Instructions(Round all numbers to the nearest cent.)(a)…
Thornhill Equipment (lessor) leased a construction crane to Vanier Construction (lessee) on January 1, 2023. The following information relates to the leased asset and the lease agreement. (Click the icon to view the data.) Both companies use the straight-line depreciation method for cranes, and they both have December 31 year-end dates. Required Requirement a. Evaluate how the lessor (Thornhill Equipment) should account for the lease transaction. Start by determining the present value of the lease payments (PVLP). Then calculate the percentage of the PVLP compared to the fair value of the leased asset. (Use a financial calculator for all present value computations. Enter all currency values as positive amounts rounded to the nearest whole dollar. Round the percentage to the nearest whole percent.) PVLP Fair value of asset PVLP as % of fair value % Leased asset and lease agreement - Cost of crane to lessor 100,000 Thornhill's normal selling price for crane $ 146,913 Useful life…
On January 1, 2020, Firm ABC (lessor) leased a building to Firm XYZ (lessee). The relevant information related to the lease is as follows. 1) The lease arrangement is for 3 years. 2) The building's cost and fair value at commencement of the lease $60,000. The building is depreciated on a straight-line basis. Its estimated economic life is 5 years with salvage value of $12,000 at the end of the lease. The residual value after 5 years is assumed to be zero. 3) The lease contains no renewal options. The building reverts to Firm ABC at the termination of the lease. 4) The implicit rate of Firm ABC (the lessor) is 6% and is known by Firm XYZ. 5) Both the lessor and the lessee are on a calendar-year basis. (a) Prepare the journal entries that Firm XYZ should make in 2020 Dates 1/1/2020, 1/1/2020, 1/1/2021, 1/1/2022 Please include Lease Payment, Interest, Reduction of Lease Liability, Lease Liability (b) Prepare the journal entries that Firm ABC should make in 2020
Carla Vista Corporation owns equipment that cost $94,400 and has a useful life of 8 years with no salvage value. On January 1, 2025, Carla Vista leases the equipment to Sandhill Inc. for one year for one rental payment of $17,700 on January 1. Assuming Sandhill (lessee) elects to use the short-term lease exception, prepare Sandhill's 2025 journal entry. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
On January 1, 2020, Nelson Co. leased a building to Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,500,000 (unguaranteed). 2. The leased building has a cost of $4,000,000 and was purchased for cash on January 1, 2020. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $275,000 per year and are made at the beginning of the year. 5. Wise has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Wise. 6. Both the lessor and the lessee are on a calendar-year basis. Instructions a. Prepare the journal entries that Nelson should make in 2020. b. Prepare the journal entries that Wise should make in 2020. c. If Wise paid $30,000 to a real estate broker on January 1, 2020, as a fee for finding the lessor, what is the…
On January 1, 2025, Windsor Co. leased a building to Wildhorse Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,100,000 (unguaranteed), 2. The leased building has a cost of $3,600,000 and was purchased for cash on January 1, 2025. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $250,000 per year and are made at the beginning of the year. 5. Wildhorse has an incremental borrowing rate of 9%, and the rate implicit in the lease is unknown to Wildhorse. 6. Both the lessor and the lessee are on a calendar-year basis. Click here to view factor tables. (For caiculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare the journal entries that Windsor should make in 2025. (List oll debit entries before credit entries. Credit account…
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At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year leaseagreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2018, the beginningof the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescentat a cost of $180,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at theend of its life. (Because the lease term is only nine years, the asset does have an expected residual value at the endof the lease term of $90,995.) Crescent seeks a 10% return on its lease investments. By this arrangement, the leaseis deemed to be an operating lease.Required:1. What will be the effect of the lease on Crescent’s (lessor’s) earnings for the first year (ignore taxes)?2. What will be the balances in the balance sheet accounts related to the lease at the end of the first year forCrescent (ignore taxes)?
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