machine and immediately leased it back at market rental.The details of the sale and leaseback are:Annual rental payable at the end of each yearAt the beginning of current year, Juan Company sold aProblem 15-3 (IFRS)the beginning of current year, Juan Company sold aSale price at fair valueFair value of machineCarrying amount of machine5,000,0005,000,0004,500,000600,00010 years5 years10%Remaining life of machineLease termImplicit interest ratePresent value of an ordinary annuity of 1 at 10%for five periods3.791The leaseback provides for neither transfer of title to thelessee nor a purchase option that is reasonably certain to beexercised.Required:1. Compute the initial measurement of lease liability.2. Compute the cost of right of úse asset.3. Determine the gain on right to transferred to thebuyer-lessor.4. Prepare journal entries on the books of seller-lessee for thecurrent year.. Prepare journal entries on the books of buyer-lessorfor the current year.

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Problem 15-3 (IFRS) At the beginning of current year, Juan Company sold a machine and immediately leased it back at market rental. The details of the sale and leaseback are: Sale price at fair value Fair value of machine Carrying amount of machine Annual rental payable at the end ofeach year Remaining life of machine Lease term Implicit interest rate Present value of an ordinary annuity of l at 10% for five periods 5,000,000 5,000,000 4,500,000 600,000 10 years 5 years 10% 3.791 The leaseback provides for neither transfer of title to the lessee nor a purchase option that is reasonably certain to be exercised. Required: 1. Compute the initial measurement of lease liability. 2. Compute the cost of right of use asset.

Problem 15-3 (IFRS) At the beginning of current year, Juan Company sold a machine and immediately leased it back at market rental. The details of the sale and leaseback are: Sale price at fair value Fair value of machine Carrying amount of machine Annual rental payable at the end ofeach year Remaining life of machine Lease term Implicit interest rate Present value of an ordinary annuity of l at 10% for five periods 5,000,000 5,000,000 4,500,000 600,000 10 years 5 years 10% 3.791 The leaseback provides for neither transfer of title to the lessee nor a purchase option that is reasonably certain to be exercised. Required: 1. Compute the initial measurement of lease liability. 2. Compute the cost of right of use asset.

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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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.
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
At the start of the current year, Grace Company sold a building andimmediately leased it back, The following data pertain to the sale andleaseback transaction: Sale price at above fair value P9M; FV of the buildingis P8M, with carrying amount of P7,200,000 and annual rental payable atthe end of each year at P600,000. The remaining life of the building is 20years and the lease term is 4 years. The implicit interest rate is 12%. PV of anordinary annuity of 1 at 12% for 4 years is 3.037. 1. What is the initial lease liability? 2. What is the cost of the right of use asset? 3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?
At the beginnig of current year, East Company leased a new machine from North Company with the following information: Annual rental payable at beginning of each lease year 4000,000Lease Term 10 yearsUseful life of machine 12 yearsImplicit interest rate 14% Present value of an annuity of 1 in advance for 10 periods at 14% 5.95Present value of 1 for 10 periods at 14% 0.27 East company had the option to purchase the machine upon the expirtation of the lease term by paying P500,000. The purchase option is reasoably certain to be exercised. What amount should East Company…
On January 1, 2021, Wait Company leased equipment from a lessor with the following information:Annual rental payable every December 31: 2,000,000Residual value guarantee: 1,000,000Initial direct cost: 600,000Estimated dismantling and restoration cost required by contract at present value: 780,000Annual executory cost paid by the entity: 100,000The lease term is four years while the equipment’s useful life is 8 years. The implicit rate in the lease, known by the entity, is 10%. The present value of an ordinary annuity of 1 at 10% for 4 periods is: 3.17. The present value of 1 at 10% for 4 periods is: 0.68. What is the initial lease liability? 6,340,0007,020,0008,000,0008,400,000 What is the cost of the right of use asset? 6,340,0007,020,000 8,400,0008,000,000
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On December 31, 2020, Grains Company sold a truck to Bryan Company and simultaneously leased it back for one year. The entity provided the following information: Sales price is P360,000. Carrying amount is P330,000. PV of reasonable lease rentals at 30,000 for 12 months @ 12% is P341,000. Estimated remaining useful life of the asset is 12 years. In the income statement for 2020, what amount should be reported as gain from the sale of the truck?
At the beginning of current year, JadeCompany purchased a new machine forP4,800,000 and leased it to East the same day.The machine has an estimated 12-year life andwill be depreciated P400,000 per year. The leaseis for a three-year period at an annual rental ofP850,000.Additionally, East paid P300,000 to Jade as alease bonus to obtain the three-year lease. Jadeincurred insurance expense of P80,000 for theleased machine during the current year.What is the operating profit of the lessor on theleased asset for the current year?
On January 1,2020, an equipment of ABC Company with a carrying value of P 1,500,000 was sold at P 2,000,000 equal to its fair value to DEF Company. ABC immediately leased back the equipment from DEF Company with an annual rental of P 150,000 for 5 years, payable every December 31 of each year. The market rate of interest is 10%. How much is the gain on sale leaseback to be recognized by ABC Company? (For present value factors, do not round off) P 568,618.02 P 426,463.51 P 1,073,536.49 P 357,845.49
On January 1,2020, an equipment of ABC Company with a carrying value of P 1,500,000 was sold at P 2,000,000 equal to its fair value to DEF Company. ABC immediately leased back the equipment from DEF Company with an annual rental of P 150,000 for 5 years, payable every December 31 of each year. The market rate of interest is 10%. How much is the gain on sale leaseback to be recognized by ABC Company? (For present value factors, do not round off) A. P 568,618.02 B. P 426,463.51 C. P 1,073,536.49 D. P 357,845.49
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Sony Inc. is a lessor-manufacturer of expensive machinery. On January 1,2011, amachinery is leased to another entity with the following information:Annual rental payable at the end of each year P200,000Lease term 4 yearsUseful life of machinery 5 yearsCost of Machinery 300,000Estimated residual value 50,000Initial direct cost paid by lessor 20,000Incremental borrowing rate of lessee 14%Implicit interest rate of lessor known to lessee 12%Note: At the end of the lease term on December 31,2014, the machinery will revert to lessor.Problem 17. Except from the fact that the leased machinery will not revert to lesser because there is bargain purchase option of P50,000 at the end of lease term.Required: Based on the result of your audit, determine the following:____________1. Gross Lease Receivable____________2. Sales or Net Investment____________3. Unearned Interest____________4. Profit on saleDirect Finance Lease – Lessor (PAS 17 and PFRS